Walmart's Stock Rises on Better Than Expected Earnings and Strong Food Sales

Walmart Inc.'s stock remained relatively stable on Thursday, subsequent to the release of their second-quarter earnings report that exceeded expectations and prompted an upward adjustment of their guidance.

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According to a statement from Chief Executive Doug McMillon, "Food is a strength, but we’re also encouraged by our results in general merchandise versus our expectations when we started the quarter." He further expressed confidence in the company's inventory position and its favorable positioning for the latter half of the year.

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Roth MKM analyst Bill Kirk, who maintains a buy rating on the stock, noted that the revised guidance has surpassed the heightened consensus expectations. He underscored that the robust performance anticipated for the fiscal year 2024 is a strong start to a multi-year period in which operating profit growth could outpace net sales growth.

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In the second quarter, Walmart, headquartered in Bentonville, Ark. (WMT, -1.44%), reported net income of $7.891 billion, or $2.92 per share, up from $5.149 billion, or $1.88 per share, in the corresponding period of the previous year. The company's adjusted per-share earnings reached $1.84, significantly surpassing the FactSet consensus of $1.71.

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Additionally, revenue experienced a rise to $161.632 billion from $152.859 billion in the same period a year ago, outperforming a FactSet consensus estimate of $160.224 billion.

Walmart achieved a 6.4% increase in U.S. same-store sales, notably outpacing the FactSet projection of a 4.1% gain. Gross margins saw a 50 basis points rise compared to the previous year, attributed to mitigated markdowns and supply-chain costs, partially offset by pressure in the grocery and health and wellness segments.

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The company's e-commerce sales demonstrated a 24% increase, primarily driven by pickup and delivery services. Walmart gained market share in the grocery sector, bolstered by robust unit growth.

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International sales exhibited a 13% rise to $17.6 billion, driven by contributions from Walmex, China, and Flipkart.

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While Sam’s Club U.S. sales experienced a slight 0.3% decline to $21.8 billion, same-store sales at the subscriber warehouse club, excluding fuel, rose by 5.5%. This growth was spearheaded by food and consumables, as well as health-related categories.

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Walmart's updated projections include a third-quarter adjusted earnings per share forecast ranging from $1.45 to $1.50, accompanied by sales growth expectations of 4% to 4.5%. Consensus estimates indicate per-share earnings of $1.49 and sales growth of 2.9%.

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For fiscal year 2024, the company anticipates adjusted earnings per share ranging from $6.36 to $6.46, along with sales growth of 4% to 4.5%. The FactSet consensus projects earnings of $6.30 per share and sales growth of 4.4%.

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Year-to-date, the company's stock has recorded a 12.3% increase, while the Dow Jones Industrial Average (DJIA, +0.07%) has seen a 5% gain, and the S&P 500 (SPX) has registered a 15% rise.

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