Here’s Why Walmart’s Fiscal 1Q18 EPS Could Fall
What analysts are projecting
Walmart (WMT) is scheduled to report its fiscal 1Q18 results on May 18, 2017. Analysts on average expect the retail giant to report adjusted EPS (earnings per share) of $0.96, representing a YoY (year-over-year) fall of 2.0%. The company’s price investment strategy to gain market share amid increased competition from Amazon.com (AMZN) and an adverse currency movement could lower margins and, in turn, profitability.
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Walmart’s management projected fiscal 1Q18 EPS to be $0.90–$1. The guidance included an adverse currency impact of $0.02 per share. Analysts expect rival Target (TGT), which is slated to report its fiscal 1Q17 results on May 17, 2017, to also post a fall in adjusted EPS, driven by lower sales and increased business investments. On the other hand, analysts expect Costco Wholesale (COST) to post comparatively better bottom-line growth in its upcoming fiscal 3Q17 results.
Earnings trend so far
Walmart has exceeded Wall Street’s consensus estimate for six consecutive quarters thanks to improvement in store traffic coupled with the stellar performance of its e-commerce arm. During the last reported quarter, fiscal 4Q17, the company’s adjusted EPS came in marginally ahead of analysts’ expectation but fell about 12.8% YoY.
Management remains upbeat and expects continued improvement in store traffic to boost the company’s EPS. Its beefed up digital business is expected to further cushion the bottom-line performance. However, deflationary pressure on margins, mainly stemming from the food category, an adverse currency movement, and increased price investments, will remain a drag on EPS.
If you’re seeking exposure to Walmart through ETFs, you can invest in the Consumer Staples Select Sector SPDR ETF (XLP), which has 5.9% of its total holdings in the company.