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Walmart (NYSE:WMT) – shares up 5% after earnings and revenue beats hiked FY profit guidance

  • Retail corp posts $1.27 Non-GAAP EPS and $130.4bn revenue versus $1.22 and $128.6bn consensus
  • Comparable sales grow (+2.8%) for 20th straight quarter, e-commerce business strong
  • Hikes FY2020 adjusted EPS guidance
  • Shares advance 5.7% on Friday, biggest gain since August 2018

Walmart Inc (NYSE:WMT) gave the retail sector a welcome shot in the arm on Thursday after posting better-than-expected earnings and revenue in the second quarter, but also warned that volatile US-China trade relations could be a drag on business during the coming months.

Strong performance during the three month period ending July enabled Walmart to deliver $1.27 Non-GAAP earnings per share, which was five cents ahead of the Wall Street consensus. There was also a four-cent beat for GAAP EPS of $1.26 as various segments including e-commerce thrived.

The Arkansas-headquartered retail corp also trumped revenue forecasts by $1.08bn with total sales of $130.4bn during the latest period – a 1.8% rise on the comparable period in 2018. International sales did decline by 1.1% to $29.1bn, but comparable sales domestically rose 2.8% versus the 2.5% consensus.

However, Walmart noted that it has worked with suppliers to prevent prices from rising, despite the rise of import duties on goods shipped from China to the US, which could soon threaten the company’s impressive record of 20 consecutive quarters of retail sales growth.

Walmart remains optimistic about the 2020 fiscal year for now and even moved to hike its profit guidance on Thursday. It warned of low-single digital decline earlier in the year but now believes it could swing to a slight increase, while US comparable sales are expected to top out at 2.5% growth.

“From a performance point of view, we're pleased with the strength we see in the business. Customers are responding to the improvements we're making, the productivity loop is working, and we're gaining market share,” Walmart CEO, Doug McMillon, said in a statement on Thursday. He added: “We're on track to exceed our original earnings expectations for the year, and that's possible because of the work our associates do every day.”

Walmart will be particularly pleased with the performance of its e-commerce, which recorded a 37% year-over-year increase in sales in Q2 – driven primarily by gains from its grocery business. This has been an area where the retail giant has struggled to gain a foothold compared to rivals such as Amazon (NASDAQ:AMZN).

The strong showing helped Walmart shares to climb 5.7% in Friday’s premarket, making it the biggest move for the company in 12 months. Shares were available for $112.57 just before the first bell and are now firmly in positive territory (+21.8%) for the year-to-date.

Analysts are still relatively bullish on Walmart as the company has 14 Buy ratings and 10 Hold Ratings compared to just a single Sell rating. The average price target of $112.93 is pretty much in line with its current price.