Walmart Q4 earnings preview: Where next for WMT stock?

When will Walmart release Q4 earnings?

Walmart is scheduled to publish fourth quarter and full year 2022 earnings at 0600 CST on Tuesday February 21. A conference call with management will follow at 0700 CST.

Walmart Q4 earnings consensus

Walmart is forecast to report a 4.5% year-on-year rise in revenue in the fourth quarter to $159.7 billion and report a 1.2% decline in adjusted EPS to $1.51.

The retail kingpin is on course to report a 6% rise in annual revenue to $606.9 billion and a 5.5% decline in full year adjusted earnings to $6.11 per share.

Walmart Q4 earnings preview

Walmart, as the world’s largest retailer and the biggest employer in the US, is always closely watched by the markets as a bellwether for the health of wider economy.

The company is having to adapt to rapidly changing consumer habits as people spend more cautiously. They are buying more food and fewer discretionary items, trading down in search of savings, and hunting for value at a time when persistent inflation is pushing prices up. This caused major inventory problems for Walmart and other retailers last year as they were saddled with too much of the stuff nobody wanted and not enough of the products consumers yearned for. Fortunately, Walmart was largely past this problem before the Christmas holidays.

Still, Walmart’s US comparable sales are forecast to rise 4.9% in the fourth quarter, marking the slowest growth over the key holiday shopping season in three years. It is important to remember that sales will still be some 10% higher than two years ago, so while growth has slowed it shows Walmart has gained significant ground and stolen market share in recent years.

Other retailers, including Amazon, saw sales growth stall to record lows in the period, but Walmart does have greater exposure to food and drink, which is swallowing up more of consumer’s cash in the inflationary environment. Plus, its store network will have attracted shoppers keen to return to stores following years of shopping online. Its cheaper private label goods are also proving popular, especially as it is still pushing back on suppliers trying to introduce more price hikes even as inflation eases. That also shows Walmart is siding with consumers and committed to maintaining its reputation for ‘Every Day Low Prices’.

Recent data shows US retail sales rose 3% in January compared to December, which was much stronger than anticipated to suggest consumers are in better shape than markets thought, and fears of a recession may be overdone. The fact food and furniture were among the fastest-growing sectors bodes well for Walmart, and its worth flagging that its outperforming the wider market considering its own sales are growing at a faster pace. All of this together suggests Walmart could deliver a beat when it comes to fourth quarter sales.

Turning to its other brands, Sam’s Club, its members-only big box store, is expected to remain the outperformer in the business with comparable sales forecast o jump 8.4% in the quarter as it continues to attract new members. Its international arm, comprised of brands like Indian ecommerce giant Flipkart and its Mexican business Walmex, is expected to report a 2.5% rise in revenue to $27.7 billion, and its ongoing expansion in both the US and overseas should continue to fuel strong double-digit revenue growth for its advertising unit.

The bottom-line remains under pressure from rising expenses, including the cost of its 2.3 million-strong workforce, and because margins have wavered because shoppers continue to buy more food and essentials, which offer lower margins than more lucrative discretionary items.

Walmart should provide an outlook for the new financial year when it releases results, and this will prove highly influential on the share price. Wall Street is looking for Walmart to deliver a 3.3% rise in net sales, 3.1% growth in US comparable sales and a 7% rise in adjusted EPS in the year to the end of January 2024. That would mark a slowdown in sales growth, but the bottom-line should return to growth thanks to easier comparatives and a sharper focus on costs.

Where next for WMT stock?

Walmart shares have tried and failed to break above $146.60 on numerous occasions in early 2023, making this a key level to watch. If it can break above this immediate upside target, then a much larger potential move toward the 2021-highs of $152 is on the cards.

The 44 brokers that cover Walmart see greater upside potential with the average target price sat at $161.50 – above the all-time highs we in April 2022.

On the downside, we have seen early signs that $144.50 could provide some support going forward but the stock is still following a supportive trendline that should see it slide as deep as $141 over the coming sessions.

How to trade Walmart stock

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