Q3 Earnings Season: Walmart Inc.

Walmart Inc., is one of the world’s largest supermarket chains, offering food, apparel, furniture, pharmaceuticals, electronics and home appliances among many other things. Walmart has a market capitalisation of $386.64B and is the fifth favourite brand behind only Microsoft, Google, Amazon, Apple and above Meta. The retail giant will release earnings results for the fiscal quarter ending October 2022 next Tuesday, November 15 before the market opens.

Walmart BPA Fuente: nasdaq.com

Zacks, ranks Walmart at Rank #3 (Hold) and in the 43% Fund Rank (#143/252) in the Retail-Supermarkets industry. For this report, EPS is expected at 1.31 (-9.66% YoY) and for the fiscal year-end at 5.85 (-9.4% YoY). Earnings are expected to be 147.34B (4.85% YoY) with an ESP of -0.25% and for the FY it is 600.74B (4.9% YoY). The estimate has had 1 downward and 1 upward revision in the last 60 days. WMT has a P/E ratio of 24.37 and a PEG ratio of 4.43.

The company reported results below the estimate in only 4 out of the last 20 reports, the last 2 reports ago. Last quarter the company reported EPS of $1.77 and revenues of $151.86B (+8.4%). During the last month profitability increased by 7.6%.

WMT ventas reportadas y previsión. Fuente: money.cnn

Walmart has the same challenges as many other companies. Inflation, which remains a major factor, continues to be in the public eye, with Thursday’s report showing that US inflation fell from 8.2% to 7.7%, a drop that could be reflected in easing consumer spending amid the economic downturn (which is favourable for omnichannel strategists like Walmart) that has engulfed the last few quarters. Although inflation declined, food and transportation rose 0.7% last month and are up 10.6% and 11.2% year-on-year respectively.

WMT has focused on increasing its e-commerce on par with its physical shops, with exclusive discounts for customers giving them the option to cut costs even while shopping at its 10,500 shops equally helping with currency fluctuations that also affect the company and the increased competition from Amazon and Target.

Operating costs continue to rise, but Walmart looks stronger than other companies thanks to its geographic clustering of shops and the fact that the company also distributes a large amount of gasoline to its customers, thus somewhat neutralising the cost of transportation with the rising price of fuel from its pumps.

Variacion de Inflacion por segmento de EEUU Fuente: datosmacro.expansion.com

The company has also focused on expanding its international operations with a presence in Canada, Chile, China, India, Mexico, Africa and Central America while operating its main supercentres along with Sam’s Clubs nationwide.

Walmart has also boosted its healthcare arm “Walmart Health” that debuted in 2019, which also includes a growing subscription service.

In other business, Walmart signed a partnership with Paramount in the shift to this quarter. Customers with Walmart+ memberships, in addition to their existing in-store, gas, InHome, grocery or music (Spotify) benefits, will also have access to a Paramount+ Essential subscription at no additional cost. This plan will give them access to a variety of popular content, from sagas like “Star Trek” to movies and children’s programming. That membership costs $98 a year and will include the Paramount+ subscription for an additional $60. Walmart has also talked to Disney and Comcast for other partnerships, according to the NYT.

Walmart+ has seen positive membership growth since its launch in September 2020. Walmart+ is estimated to average approx. 21.5 million members.

Technical Analysis – Walmart D1 – $142.36

WMT.s D1

Walmart price fell from highs at 160.74 to leave lows at 117.17 from where it has recovered more than 50% of the fall in the form of an ascending channel with test 2 days ago at 61.8% Fibo at 144.10.

Negative data could make the price bounce off the upward channel guideline near the 38.2% at 133.81 and the 100-period D1 SMA at 132.29, and in the case that the psychological level of 130.00 is broken there could be a continuation of the downward momentum from April-May to the lows of the aforementioned channel.

Otherwise, there could be a bullish impulse to move up to the resistance zone bounded by the psychological level at 150.00 at 78.6% at 151.42 and from there to the 88.6% Fibo highs at 155.77 to the current historical highs at 160.74.


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Aldo Zapien

Market Analyst 

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