Will E-Commerce Sales Drive Walmart's (WMT) Q3 Earnings?

Walmart Inc. (NYSE:WMT) , which is slated to report third-quarter fiscal 2020 results on Nov 14, has been gaining from its robust e-commerce business. The company has been strengthening this business, which has been aiding its top line. However, costs associated with e-commerce investments have been a drag on margins to some extent.

Walmart has been trying all means to evolve with the changing consumer environment and stay firm against e-commerce giant Amazon (NASDAQ:AMZN) . The company’s initiatives like buyouts, alliances, improved delivery and payment systems, and enhanced website have been boosting its e-commerce sales. To this end, the company’s strategic partnership with Microsoft (NASDAQ:MSFT) and buyouts of ShoeBuy, Moosejaw, Bonobos, ModCloth and Jet.com, among others, have been noteworthy.

Further, the 77% stake in Flipkart has been aiding Walmart’s e-commerce sales, though costs associated with this investment have been weighing on the operating income and the bottom line. Nonetheless, Walmart’s U.S. e-commerce sales have been gaining traction and are benefiting from its aggressive efforts to expand in the booming online grocery space.

In this regard, Walmart’s alliance with Point Pickup, Skipcart, AxleHire and Roadie has strengthened its online grocery delivery service. Also, its deal with Postmates to expand the online grocery delivery service to cover more than 40% of the families in the United States has been yielding results. Furthermore, the company’s contract with DoorDash and the acquisition of Parcel have been enhancing its delivery service and driving grocery sales. Notably, Walmart U.S. exceeded 1,100 delivery locations during the second quarter of fiscal 2019 and now has more than 2,700 pickup locations.

Other Trends

Walmart’s comparable store sales (comps) have been benefiting from robust store enhancement and e-commerce endeavors. To this end, the Zacks Rank #2 (Buy) company has been making several efforts to enhance merchandise assortments. Also, the company is focusing on store remodeling, in order to upgrade those with digital and other advanced innovation. Apart from these, Walmart’s comps have been gaining from a compelling pricing strategy, which however has been weighing on margins. We also commend the company’s efforts to improve its international performance by focusing on regions with greater growth potential.

The Zacks Consensus Estimate for third-quarter earnings has been stable over the past 30 days at $1.09 per share. This suggests an increase of 0.9% from the year-ago period’s reported figure. The consensus mark for revenues is close to $129 billion, indicating a rise of 3.3% from the figure reported in the year-ago quarter. (Read More: Factors Setting the Tone for Walmart's Q3 Earnings)

Looking for Other Promising Retail Stocks? Check These

Target (NYSE:TGT) , with a Zacks Rank #2, has a long-term earnings per share growth rate of 7.1%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Burlington Stores (NYSE:BURL) , also with a Zacks Rank #2, has a long-term earnings per share growth rate of 15.9%.

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