Walmart Inc. is scheduled to report second-quarter earnings on Thursday and UBS analysts think the results will show that Amazon.com Inc.’s big Prime Day event was a plus for both companies.
For the quarter, UBS thinks Walmart’s
e-commerce growth was 35% in the U.S..
“Walmart likely saw tailwinds from online grocery,” analysts led by Michael Lasser wrote about the second quarter, noting that the perk was offered at about 56% of Walmart locations. “Also it likely benefited from broad increased digital engagement around Prime Day (probably more good than bad for Walmart). Though Amazon’s move to one-day shipping on 10 million-plus Prime items could have offset any benefit from Walmart’s free, next day offer on 220,000 items.”
UBS rates Walmart stock neutral with a $107 price target.
Walmart has an average stock rating of overweight with a target price of $112.93, according to 31 analysts polled by FactSet.
Here’s what else to look for:
Earnings: FactSet is forecasting earnings per share of $1.22, down from $1.29 last year.
Estimize, which crowdsources estimates from analysts, fund managers and academics, expects EPS of $1.24.
Walmart has beat the FactSet earnings outlook for the last six quarters.
Revenue: FactSet expects revenue of $130.10 billion, up from $128.03 billion last year.
Estimize expects revenue of $130.59 billion.
Walmart missed FactSet’s sales expectations in the last quarter.
FactSet is guiding for overall same-store sales growth of 2.4%, with the same, 2.4% growth, expected in the U.S.
Stock price: Walmart shares are up 6.3% for the past three months, and up 14% for the year to date. The Dow Jones Industrial Average
has gained 9.2% for the year to date, and the S&P 500 index
is up 13.3% for the period.
What analysts are saying:
-UBS and Quo Vadis expect solid results:
“Its U.S. business likely benefited from continued strength in grocery and digital,” said UBS. “Though the company’s gross margin likely faced pressure on the back of a tougher compare and continued price investments.”
John Zolidis, president of Quo Vadis, says his perspective on Walmart hasn’t changed in two years.
“Walmart is well into the process of transforming a traditional, terrestrial retail model into a transactional-model optimized for a digitally-equipped consumer,” he wrote. “This new model leverages Walmart’s historical advantages including scale, supply-chain, low-price positioning, and store locations with digital capabilities highlighted by grocery pickup, a vast selection, a portfolio of new owned brands, and delivery.”
-Low-income consumers helped Walmart’s same-store sales during the quarter:
“While Walmart faces a tough comparison against 4.5% comps in fiscal second-quarter 2019… we believe the strong low-income consumer backdrop and likely continued momentum in general merchandise (apparel and home) and fresh food (both are higher average ticket) could support potential upside,” Bank of America analysts said in a note.
Bank of America rates Walmart stock buy with a $120 price objective.
-Walmart and Target Corp.
have been faring well against Amazon
Cowen analysts say the consumer overlap between Amazon and both Walmart and Target has declined.
“We view declines in overlap as indicative of retailers not losing share to Amazon,” analysts led by Oliver Chen said.
“We believe value-oriented broadline retailers Walmart and Target are better positioned to capture share as shopper trends evolve. Meanwhile department store players are getting squeezed and are working to quickly adapt to changing shopper preferences as physical traffic continues to decline.”
Cowen rates Walmart outperform with a $130 price target. Target stock is rated outperform with a $100 price target.