Walmart Stock To Trade Lower Post Q3 Results?
Walmart (NYSE: WMT), the world’s largest retailer, operating discount stores, supercenters, neighborhood markets, and Sam’s Club warehouses, is scheduled to report its fiscal third-quarter results on Tuesday, November 15. We expect WMT stock to trade lower on a likely revenue and earnings miss in fiscal third-quarter results. The company is struggling with excess inventory, rising costs, and supply chain issues this year. It is trying to reduce excess inventory by marking it down, but this has hurt its profit margins. We expect this trend to continue for the next few quarters.
Despite Walmart reporting comparable sales growth (excluding fuel) of 6.5% in the U.S. in Q2 for the period ending July 31 (which more than doubled the increase observed in the first quarter), the company didn’t raise its guidance for the second half of the year. In other words, it still projects comparable U.S. sales growth of just 3%. It also projects 4.5% sales growth and a drop between 9% and 11% for adjusted EPS. That suggests the company is cautious about the rest of 2022, and rightfully so.
Our forecast indicates that Walmart’s valuation is $134 per share, which is 6% lower than the current market price. Look at our interactive dashboard analysis on WMT’s Earnings Preview: What To Expect in Q3? for more details.
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(1) Revenues expected to be slightly below consensus estimates
Trefis estimates Walmart’s Q3 2023 revenues to be around $146 Bil, slightly below the consensus estimate. In the first two quarters of 2023, Walmart brought in $294 billion in revenue, 5% more than in the same period in fiscal 2022. Also, thanks to high inventory, increased accrued liabilities, and rising spending on property and equipment, free cash flow in the first six months was $1.7 billion. This was well under the $7.4 billion in free cash flow for the same period one year ago.
We forecast Walmart’s Revenue to be $600.5 billion for fiscal 2023 (year ended Jan 2023), up 4.8% y-o-y.
2) EPS likely to be marginally below consensus estimates
WMT’s Q3 2023 earnings per share (EPS) is expected to be $1.30 per Trefis analysis, marginally below the consensus estimate. Rising costs and expenses along with lower gains from equity investments reduced profit growth for Walmart this year. Consequently, its adjusted earnings per share were down 12% during the same period to $3.07, due to unrealized gains and losses on the company’s equity and investment in Brazil.
(3) Stock price estimate lower than the current market price
Going by our Walmart’s Valuation, with an EPS estimate of around $5.88 and a P/E multiple of 22.8x in fiscal 2023, this translates into a price of $134, which is 6% lower than the current market price.
It is helpful to see how its peers stack up. WMT Peers shows how Walmart’s stock compares against peers on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.
What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.
| Returns | Nov 2022 MTD [1] |
2022 YTD [1] |
2017-22 Total [2] |
| WMT Return | 0% | -1% | 106% |
| S&P 500 Return | 3% | -16% | 78% |
| Trefis Multi-Strategy Portfolio | 8% | -16% | 231% |
[1] Month-to-date and year-to-date as of 11/13/2022
[2] Cumulative total returns since the end of 2016
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