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WMT Earnings Watch Strategy: Buy or Hold Decision?

Walmart (WMT) is all set to announce its fourth-quarter earnings tomorrow. With the retail giant's ambitious plans for expansion through acquisitions and store openings, what strategic stance should investors take with regard to the stock ahead of its earnings? Read more to find out…

Retail giant Walmart Inc. (WMT) is slated to announce its fourth-quarter and full-year earnings results on February 20, 2024. Wall Street expects its fourth-quarter revenue to surge by 4% year-over-year to $169.26 billion, while its EPS for the same quarter is projected to come in at $1.65.

WMT boasts an exceptional track record of surpassing its revenue and EPS estimates in each of the trailing four quarters. In the third quarter, the company witnessed solid growth in both its topline and bottom-line figures. WMT’s revenue saw an uptick driven by the robust performance of its grocery and e-commerce ventures.

In the United States, both foot traffic and spending from shoppers increased. Customer transactions saw a 3.4% uptick, while the average ticket price grew by 1.5% compared to the previous year. E-commerce sales experienced a remarkable 24% surge domestically and a solid 15% increase globally year-over-year.

Moreover, the company is diversifying its revenue streams by capitalizing on newer avenues, including advertising sales and annual memberships for Walmart+, its counterpart to Amazon Prime. In the third quarter, revenue from its advertising business, Walmart Connect, surged by an impressive 26% compared to the same period last year.

Furthermore, WMT is making significant strides to enhance its advertising arm. The company is reportedly in discussions to acquire Vizio, a leading smart television manufacturer, for over $2 billion. This potential acquisition positions WMT to capture over a fifth of the U.S. television market.

According to Nicholas Zangler, an analyst at Stephens, acquiring Vizio would grant WMT access to an engaged user base of nearly 18 million individuals. Furthermore, it would enable WMT to tap into Vizio's burgeoning software platform business, which boasts annual advertising revenues experiencing robust growth of over 27% with an impressive margin rate exceeding 60%.

On top of it, the big-box retailer plans to build or convert more than 150 large-format stores over the next five years, adding to its existing 4,600 stores across the United States. This expansion underscores WMT’s dedication to bolstering its brick-and-mortar footprint, even amidst fierce competition from online behemoths such as Amazon and Shein.

In terms of price performance, WTM’s shares have surged 18.1% over the past year and 13.7% over the past nine months to close the last trading session at $170.36.

Here are the fundamental aspects of WMT that could influence its performance in the near term:

Strong Financials

WMT’s total revenue for the fiscal third quarter (ended October 31, 2023) increased 5.2% year-over-year to $160.80 billion, while its operating income rose 3.8% from the prior-year quarter to $3.40 billion.

Moreover, the company’s attributable net income came in at $453 million and $0.17 per share versus an attributable net loss of $1.80 billion and $0.66 per share in the year-ago quarter, respectively. During the same quarter, its cash and cash equivalents stood at $12.15 billion, up 40.9% compared to $8.63 billion as of January 31, 2023. 

Upbeat Analyst Estimates

The consensus revenue estimate of $642.46 billion for the fiscal year ended January 2024 represents a 6% improvement year-over-year. Meanwhile, the consensus EPS estimate of $6.48 for the same period reflects a 2.9% year-over-year surge.

Robust Profitability

WMT’s trailing-12-month asset turnover ratio of 2.52x is 201.7% higher than the 0.84x industry average. Its trailing-12-month Return On Common Equity (ROCE) of 21.48% is 91.8% higher than the industry average of 11.20%. Furthermore, the stock’s trailing-12-month cash per share of $4.51 is 150.1% higher than the $1.80 industry average.

POWR Ratings Exhibit Solid Prospects

WMT’s robust fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, translating to a Buy in our proprietary rating system. The POWR Ratings are calculated by accounting for 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. WMT has a B grade for Momentum, which is justified by its share price currently trading above its 50-day moving average of $160.95 and 200-day moving average of $158.54.

The stock’s B grade for Stability is consistent with its 60-month beta of 0.49. Furthermore, its B grade for Sentiment is in sync with its positive analyst estimates. 

Within the A-rated Grocery/Big Box Retailers industry, WMT is ranked #13 out of the 38 stocks.

Beyond what we’ve stated above, we have also rated the stock for Growth, Value, and Quality. Get all WMT ratings here.

Bottom Line

WMT’s strategic vision to diversify its revenue streams and expand its footprint by opening stores is poised to solidify its position as a retail powerhouse. Additionally, the company’s strong third-quarter financial performance, optimistic analyst estimates, and higher-than-industry profitability further bolster its appeal as an investment candidate.

Therefore, as WMT gears up to disclose its fourth quarter results tomorrow, it might be an opportune time to scoop up the company’s shares for potential gains.

How Does Walmart Inc. (WMT) Stack Up Against Its Peers? 

While WMT has an overall grade of B, equating to a Buy rating, you may also check out these other stocks within the Grocery/Big Box Retailers industry: Ryohin Keikaku Co., Ltd. (RYKKY), Natural Grocers by Vitamin Cottage, Inc. (NGVC), and Marks and Spencer Group plc (MAKSY), carrying A (Strong Buy) ratings. To explore more Grocery/Big Box Retailers stocks, click here.  

What To Do Next?

43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.

2024 Stock Market Outlook >


WMT shares were trading at $170.36 per share on Monday afternoon, up $1.07 (+0.63%). Year-to-date, WMT has gained 8.06%, versus a 5.09% rise in the benchmark S&P 500 index during the same period.



About the Author: Anushka Mukherjee

Anushka's ultimate aim is to equip investors with essential knowledge that empowers them to make well-informed investment choices and attain sustained financial prosperity in the long run.

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