Walmart Stock (WMT): Buy the Dip Before Q3 Earnings?
Retail giant Walmart gears up for its Q3 earnings report—will the numbers justify its recent pullback?
Key factors to watch: Same-store sales growth, e-commerce momentum, and guidance on inflation pressures.
Wall Street's love-hate relationship with defensive stocks adds volatility—perfect for traders looking to play the 'whisper number' game.
Remember: When analysts downgrade a stock 'on valuation', it usually means they missed the rally.
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What Wall Street Expects
Wall Street is expecting Walmart to report Q3 earnings of $0.61 per share, marking a year-over-year change of 5.2%. Revenues are expected to be $177.14 billion, up 4.5% from the year-ago quarter. Will Walmart beat these estimates? As seen below it has a strong forecast-beating track record.
Key Issues Ahead of Earnings
In Q2 Walmart reported a 25% jump in global e-commerce sales and international sales up 10.5%. Walmart U.S. saw 4.6% comparative sales growth, driven by strong performance in categories like apparel and automotive.
However, adjusted operating income grew only 0.4% in constant currency, below expectations, due to headwinds from general liability claims expenses. In addition, it highlighted continued cost increases due to tariff-related pressures, particularly affecting middle and lower-income households.
It’s been a busy period since with Walmart further extending its reach into AI technology with a partnership with Open AI. There have also been concerns over faltering consumer confidence in the US heading into the crucial holiday season and continued fears over lingeringly high inflation.
In addition, last week Walmart announced that John Furner, currently President and CEO of Walmart US, will succeed Doug McMillon as President and CEO of Walmart, starting on February 1 next year.
BofA analyst Robert Ohmes believes the timing of the transition underscores the company’s confidence in its strong positioning and the current momentum for the business. The firm, which thinks Furner’s extensive leadership history at Walmart supports continuity and expects no major strategic changes, reaffirms a Buy rating and $125 price target on the shares.
Michael Lasser of UBS pointed to strong near-term fundamentals at the business. “Following two quarters of meaningful profit pressures, the quarter should mark a reversion to Walmart’s steady-state long-term financial algorithm,” he said.
UBS said Walmart could modestly raise its full-year outlook after the upcoming third quarter results, reflecting improved profit flow-through and e-commerce momentum.
“Overall, we believe the company could provide a Q4 outlook that looks for 3.5% to 4.5% constant-currency sales growth and EPS of $0.72 to $0.75,” Lasser wrote.
Is WMT a Good Stock to Buy Now?
On TipRanks, WMT has a Strong Buy consensus based on 28 Buy ratings. Its highest price target is $129. WMT stock’s consensus price target is $116.26, implying a 13.25% upside.
