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What to Expect from Walmart’s Q1 Results

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Analysts’ expectations

Walmart (WMT) is scheduled to announce its first-quarter results on May 16. Analysts expect Walmart’s net sales to improve. However, the company’s earnings are expected to decline on a YoY (year-over-year) basis.

Walmart’s net sales are projected to benefit from the continued momentum in comparable sales in its US business. Underlying sales at Sam’s Club and the international segment will likely support Walmart’s comps. However, the net sales growth is expected to stay low, which reflects currency volatility, competitive headwinds in the United States and China, discontinuation of tobacco sales in some of Sam’s Clubs, and deconsolidation of Brazilian operations.

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Walmart’s profit margins could continue to remain weak, which would reflect a negative mix, price investments in some of the markets, and higher transportation costs. Pressure on margins and higher effective tax rates are expected to drag Walmart’s first-quarter earnings down. However, growth in comparable sales and the lower outstanding share count are expected to support Walmart’s bottom line.

Walmart’s stock performance

So far, Walmart stock has risen 7.7% this year due to the company’s solid comparable sales growth and better-than-expected earnings in the past four quarters. However, Walmart stock lagged its peers and the benchmark index. Pressure on Walmart’s earnings limited the upside.

Costco (COST) and Target (TGT) shares have risen 18.5% and 14.1%, respectively, on a YTD (year-to-date) basis as of May 8. The S&P 500 Index has risen 14.9%.

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