Wal-Mart’s Q3 2016 Earnings Preview: What To Expect?
Wal-Mart (NYSE:WMT) is scheduled to announce its third quarter results on Thursday, November 17. The company posted solid results in the second quarter, with both its revenue and earnings per share beating analyst estimates despite currency fluctuations and increasing wage expenses. The retailing giant’s net revenues increased 0.5% year over year (y-o-y) to $120.9 billion, while it posted earnings of $1.07 per share, which was above the top end of the company’s guidance.
Most other retailers had reported flat or declining traffic in previous quarters due to the shift in consumer preferences to online shopping and increased spending on experiences rather than physical goods. But Wal-Mart was able to defy this trend in the second quarter, primarily due to its value proposition and strong brand.
The U.S. retail sector grew 2.6% y-o-y in the third quarter (Aug-Oct 2016) owing to several factors, including growth in wages, steady hiring by employers and moderate gasoline prices. [1] The U.S. gross domestic product also expanded 2.9% y-o-y in the third quarter after growing at slightly above a 1% pace in the first half of 2016. ((U.S. Economy Roars Back, Grew 2.9% in Third Quarter, wsj.com, Oct 2016)) Considering these factors, we expect a boost in Wal-Mart’s top line in the third quarter as well.
- Up 32% Since Beginning of This Year, Will Walmart’s Strong Run Continue Following Q2 Results?
- Up 15% This Year, Will Walmart Stock Rally Further After Q1 Results?
- Where Is Walmart Stock Headed Post Stock Split?
- Up 7% Already This Year , Where Is Walmart Stock Headed Post Q4 Results?
- Up 18% This Year, Will Walmart Stock Continue To Grow Past Q3?
- Can Walmart’s Stock Trade Lower Post Q2?
Recent Developments
Wal-Mart is beefing up its mobile payment app Wal-Mart Pay, as it recently partnered with JP Morgan. [2] Walmart Pay was launched in December last year, and while the company has not released usage numbers around the app, management revealed that 90% of transactions on the app involve customers using the service three to four times per month. Wal-Mart also introduced self-driving carts for shopping products at its stores. The company has also started other initiatives, including partnering with Uber and Lyft for last mile grocery deliveries and convenient store pick-up options to increase consumer convenience. On the international front, Wal-Mart announced a $50 million strategic investment in New Dada, China’s largest local on-demand logistics and grocery O2O e-commerce platform. This investment extends on Wal-Mart’s agreement with JD.com to offer two-hour delivery on groceries ordered from Wal-Mart stores through the JD Daojia Dada app. [3]
Q3 Company Guidance
Wal-Mart has performed well in the first half of fiscal 2017 and as a result, raised its full year adjusted EPS guidance to range between $4.15 to $4.35 from $4.00 to $4.30 previously. For the upcoming quarter, the company expects comparable sales growth for Wal-Mart U.S. to range between 1% to 1.5% and comparable sales growth for Sam’s Club (ex. fuel) to be slightly positive. Wal-Mart also expects adjusted earnings per share in the range of $0.90 to $1.00 in the third quarter.
Please refer to our complete analysis for Wal-Mart
See More at Trefis | View Interactive Institutional Research (Powered by Trefis)
Notes:- U.S. Retail Sales Rose Briskly in October, wsj.com, Nov 15 2016 [↩]
- Wal-Mart Pay in talks with several mobile wallet companies, reuters.com, Nov 2016 [↩]
- Walmart Announces Strategic Investment, Walmart.com, Oct 21 2016 [↩]