Walmart Beats Third-Quarter EPS Estimate, Raises Guidance

Quarterly performance

Walmart (WMT) reported better-than-expected third-quarter bottom-line results on November 15—the period ending on October 31. Walmart’s adjusted EPS of $1.08 beat analysts’ expectation of $1.01 and increased 8.0% on a YoY (year-over-year) basis.

Sustained momentum in underlying sales, a lower effective tax rate, the decline in interest costs, and a lower outstanding share count supported the company’s bottom-line growth. However, an investment in price, an unfavorable mix, and increased transportation costs had a negative impact on Walmart’s bottom-line growth.

Walmart Beats Third-Quarter EPS Estimate, Raises Guidance

Walmart’s gross margin decreased by 21 basis points, which reflected increased transportation costs and price investments in certain markets. An unfavorable mix, driven by increased e-commerce sales, also pressured the company’s margins.

In comparison, analysts expect Target (TGT) to report strong growth in its EPS during the third quarter. The lower effective tax rate and strong sales growth expectations will likely support Target’s bottom-line growth. Costco’s (COST) bottom line is also projected to grow at a healthy rate. However, price investments and a negative mix could still be a drag on the bottom line.

Outlook

Better-than-expected third-quarter earnings led Walmart’s management to increase the EPS outlook for 2018. Walmart expects its bottom line to be $4.75–$4.85. Previously, management expected the company’s adjusted EPS to be $4.65–$4.80.