Walmart Beats Q3 Earnings, Lifts FY2020 Earnings View

Walmart Beats Q3 Earnings, Lifts FY2020 Earnings View
November 15, 2019

 

Retail chain Walmart Inc. (NYSE: WMT) posted fiscal 2019 third-quarter profits that more than doubled from Q3 2018, led by an increase in revenues and a strong performance of Walmart US and International. Notably, non-GAAP earnings per share exceeded analysts’ anticipations, while revenues fell short of estimates. Nevertheless, Walmart lifted its FY 2020 annual earnings view for the second time in 2019, just before the holiday season. The stock, which closed almost flat at $120.65 yesterday, has appreciated roughly 30% in 2019.

Bentonville, Arkansas-based Walmart, posted third-quarter revenues of $127.99 billion, up 2.5% from $124.89 billion in the similar period last year. In constant currency, revenues increased 3.3% y-o-y to $129.01 billion. The Wall Street analysts had anticipated the company to post revenues of $128.65 billion for the quarter. A robust grocery business aided Walmart’s online sales increase 41% in 3Q 2019, powering an earnings beat and 21 consecutive quarters of improved performance in the US.

Walmart, which has a market cap of $344.20 billion, net income of $3.29 billion, or $1.15 per share for the third quarter of 2019, showed a huge increase from $1.71 billion, or $0.58 per share, in the year-ago period.

Consolidated net income attributable to Walmart for the quarter was $3.29 billion or $1.15 per share, sharply higher than $1.71 billion or $0.58 per share in the prior-year quarter. Excluding charges, adjusted earnings for 3Q 2019 was $1.16 per share, compared with $1.08 per share in the year-ago period. Analysts polled by Thomson Reuters anticipated the company to post earnings of $1.09 per share for Q3 2019.

Segment-wise:

  • Net sales increased 2.5% y-o-y to $126.98 billion. Specifically, Walmart US sales increased 3.2% to $83.20 billion.
  • Likewise, Walmart International’s net sales increased 1.3% to $29.17 billion. The revenues generated by Flipkart and impressive performance of Walmex and China were partially offset by weakness in the UK.
  • Sam’s Club Comp sales rose 0.7% to $14.60 billion, while e-commerce sales increased 32% on a y-o-y basis. A drop in the sales of tobacco products affected Comp sales by 350 basis points.
  • Membership and other revenues were $1.01 billion, an increase of 1.3% on a y-o-y basis.

During the quarter, the US same-store sales (shops operating for a minimum of one year in the US) increased 3.2%, versus 3.1% growth anticipated by analysts.

Transactions increased 1.3% in the recent quarter, slightly lower than the 1.6% growth posted in the same period last year.

The company’s digital operations are being severely criticized as the enterprise is losing money online for all the investments it has made to take over brands and implement faster delivery.

Walmart CEO Doug McMillon expanded on the company’s plan to improve profitability. McMillon said: “We continue to see good traffic in our stores. We’re growing market share in key food and consumables categories, including fresh. We need to translate this repetitive food and consumable volume into a stronger Walmart.com business that’s profitable over time, so that’s what we’re working on.”

Looking forward to FY 2020, Walmart now anticipates adjusted earnings, including Flipkart, to increase slightly compared to the earlier guidance of “down slightly to up slightly.” Barring Flipkart, adjusted earnings are anticipated to rise by a high single-digit percentage range compared with the previous outlook of a “mid to high single-digit percentage increase.” The Wall Street analysts forecast 0.3% growth. Excluding Flipkart, Walmart anticipates earnings to be in a high single-digit percentage. The Street is expecting earnings of $4.93 per share for 2020.

The CEO anticipates a solid holiday season. McMillon said, “prepared for a good holiday season.”

The historical price chart indicates that the stock continues to receive support from its 50-day moving average. The stochastic oscillator is also in the bullish region. Therefore, we are anticipating the stock to move up in the short-term.

wmt - technical analysis - 15th Nov 2019

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Sammy

Sammy

Sammy is our forex expert, with over 20 years experience in the financial sector, she will be keeping you up to date with the ups and downs of currencies around the world


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