The Zhitong Finance app learned that Walmart (WMT.US) is scheduled to announce earnings reports for the fourth quarter and full year of fiscal year 2020 before the US stock market on February 18. According to current market estimates, Walmart Q4 will announce a year-on-year increase of more than 2% in earnings per share and revenue. This shows that despite strong competition from Amazon, the market is still optimistic about the retail giant's performance prospects.
Q3 performance review and Q4 overall estimate
Looking back at the third quarter, Walmart's total revenue increased 2.5% year on year, and driven by the steady development of the domestic market and e-commerce, net profit attributable to the company surged 92.3% year on year, exceeding market expectations. After the financial report was released, the company's stock price rose more than 3% in the pre-market period. The company's results for the past four quarters have all exceeded analysts' expectations, which came as a surprise to investors. Most analysts recommend “hold” ratings, with an average target price of $129.63.
Zacks' general profit estimate for the fourth quarter has remained stable at $1.44 per share for the past 30 days, up 2.1% from the same period last year. The market generally expects revenue to be close to US$142.5 billion, an increase of 2.7% over the same period last year.
For fiscal year 2020, including Flipkart, management expects adjusted earnings per share to increase slightly compared to last year. Excluding Flipkart, full-year earnings are expected to grow at a high single-digit percentage. Zacks's general estimate of earnings per share for FY2020 is $4.98, up 1.4% from FY19, and expects revenue of US$525.5 billion.
Key factors to watch out for
Analysts expect revenue growth in the fourth quarter to be driven by the domestic market, passenger traffic brought about by holiday sales, and the expansion of e-commerce initiatives.Through partnerships with JD and Tencent, and investments in last-mile delivery, the company's omnichannel capabilities have all shown acceleration. Walmart expects that in the next 5 years, the pace of change will accelerate as new technologies such as autonomous driving, artificial intelligence, and analytics become possible breakthroughs in future growth prospects. In mid-December 2019, the company and Nuro were testing an automated vehicle grocery delivery program for select Houston customers.
Additionally, Walmart has been benefiting from strong sales growth in its comparable stores。 The company's performance in the US increased year-on-year for 21 consecutive quarters, and the international business also performed well. The company has been committed to growth in all markets, relying on fresh products, and the expansion of online groceries and private brands.
In the face of increasingly fierce competition from online giant Amazon, Walmart has been benefiting from improving stores and growing e-commerce.In this regard, the company is focusing on improving product categories as stores expand and transform to upgrade digital and other advanced innovations. Walmart has begun to improve its search, improve its website, and implement better basic principles, including product reviews, inventory mirroring, and on-time delivery. In the e-commerce space, Walmart has been profiting through acquisitions and alliances. The company's 77% stake in Flipkart has always helped the company achieve profit, yet the costs associated with this have always affected the company's operating income and profits. A few other notable acquisitions, such as ShoeBuy, Moosejaw, Bonobos, ModCloth, and Jet.com, have also been helping Walmart.
Notably, the company's focus on boosting online grocery shopping by providing convenient shopping options and seamless grocery delivery has largely boosted e-commerce sales.To this end, the deal with Postmates, the buyout of Parcel, and alliances with Point Pickup, Skipcart, AxleHire, and Roadie all bode well. Management expects U.S. e-commerce sales to grow 35% in FY2020.
But it's also important to note that Walmart's competitors are also benefiting from a compelling pricing strategy that has been squeezing profit margins.Additionally, the company's profit margins have been under pressure due to the costs associated with e-commerce investments and technological advancements, as well as the growing e-commerce portfolio.
Walmart shares closed up 0.38% to $117.89 on Friday. The stock has been trading between $95 and $125.38 for 52 weeks.