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Will Walmart Stock Rise More on Strong Results?


Feb. 20 2019, Published 8:06 a.m. ET

Key takeaways

Walmart (WMT) stock closed 2.2% higher on February 19 thanks to the retailer’s better-than-expected fiscal 2019 fourth-quarter earnings results for the period that ended on January 31. Walmart’s top line came in ahead of analysts’ estimate thanks to the sustained momentum in its e-commerce and in-store sales during the holiday season.

Walmart expanded its online order fulfillment options, including online grocery pickup services and doorstep delivery, in the period, which drove its e-commerce sales higher and meaningfully contributed to its comparable sales growth rate.

Strong sales and a lower effective tax rate drove its fiscal 2019 fourth-quarter EPS, which also came in ahead of Wall Street’s estimate.

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We expect Walmart to sustain its sales growth momentum in fiscal 2020. The company’s top line faces tough YoY (year-over-year) comparisons, but its management remains upbeat and expects sales in its US business segment to continue to benefit from the expansion of its digital offerings, which is an encouraging sign. However, the deconsolidation of its Brazilian operations and the discontinuation of tobacco sales at certain Sam’s Clubs are expected to hurt it.

Walmart’s bottom line is expected to remain pressured owing to dilution from its acquisition of Flipkart. Excluding the Flipkart acquisition, Walmart’s bottom line is expected to rise on a YoY basis.

Overall, Walmart impressed with its quarterly performance, and it remains on track to deliver strong sales in the coming quarters.

YTD stock performance

Shares of big-box retailers are on an uptrend. Walmart stock is up 9.7% so far this year as of February 19. Meanwhile, Target (TGT), Costco (COST), and Kroger (KR) are up 10.9%, 7.1%, and 7.5%, respectively.


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