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Can Walmart’s Fiscal 4Q18 Results Raise Its Stock Higher?

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Part 2
Can Walmart’s Fiscal 4Q18 Results Raise Its Stock Higher? PART 2 OF 6

What to Expect from Walmart’s Fiscal 4Q18 Earnings

Analysts’ expectations

Walmart (WMT) is expected to announce its fiscal 4Q18 earnings on Tuesday, February 20, 2018. Analysts expect it to report adjusted EPS (earnings per share) of $1.37, a 5.4% rise YoY (year-over-year). The company has managed to improve its earnings in the first three quarters of its current fiscal year, despite pressure on its margins from increased investments in growth initiatives and the heightened price war. It has surpassed analysts’ expectations in the past nine quarters.

What to Expect from Walmart’s Fiscal 4Q18 Earnings

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Given the company’s strong performance in the first three quarters of fiscal 2018 and the anticipation of strong growth during the holiday season, Walmart’s management raised its fiscal 2018 EPS guidance during its fiscal 3Q18 conference call. Its EPS is expected to be $4.38–$4.46 compared to its prior guidance of $4.30-$4.40.

What could boost Walmart’s fiscal 4Q18 EPS?

Walmart’s bottom line is expected to benefit from strong sales across all business segments and channels. It’s witnessing improved store traffic, particularly in the United States, which is expected to boost its comps (comparables) and, in turn, its EPS. A favorable currency trend, lower corporate tax rates, and share repurchases could further cushion its bottom line.

However, Walmart’s value pricing to drive store traffic, an adverse mix, and continued investments in growth initiatives, including the strengthening of its digital arm, are expected to remain a drag and restrain its EPS growth rate.

Strong sales are expected to boost the EPS of its peers Costco (COST) and Target (TGT). However, margin pressure from increased investments in growth measures is anticipated to restrict EPS growth.

Analysts expect Costco to register double-digit growth in its bottom line in the upcoming quarter, driven by strong sales and cost savings. However, price investments could hurt its profitability. Target’s bottom line is expected to mark a YoY decline in fiscal 4Q18 since the benefits of improved sales are projected to be more than offset by increased business investments and higher costs associated with digital fulfillment.

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