Earnings Preview | Big Players Optimistic: Will Walmart's Q2 Performance Shake the Retail Industry Again?

According to the financial news app Zhitong Finance, Walmart (WMT.US) will release its second-quarter results on August 15th. So far this year, the stock has risen by 30%, with the market giving high expectations. Analysts generally expect Walmart's Q2 revenue to reach $167.3 billion, earnings per share to be $0.65, and U.S. same-store sales to increase by 3.3%. It is widely believed that if global market turmoil continues, Walmart, as a defensive stock choice, will continue to benefit. At the same time, the entire retail industry is closely watching the impact of this retail giant on American consumers.

Morgan Stanley expects Walmart to have another strong quarter despite weak consumer spending, thanks to its leading market share. Analyst Simeon Gutman believes that if Walmart's same-store sales performance meets expectations, the company's performance will be accepted by the stock market, especially in the case of a slowdown in other retail sectors. He emphasized, "Given the slowdown in July retail data, rising risks of consumer slowdown, and the upcoming 2024 election, we believe that maintaining guidance expectations will be accepted by the market under these uncertainties."

Walmart remains the top pick for investment bank Oppenheimer. Oppenheimer analyst Rupesh Parikh is slightly cautious about Walmart's financial performance this time. As Walmart has recently outperformed Wall Street's expectations and provided aggressive potential revenue forecasts for the third quarter, Parikh and his colleagues are currently more moderate in their views on this trend.

Parikh pointed out, "In the current environment of moderate inflation, we believe that management may raise earnings per share expectations for FY24 (January 2025), but will maintain full-year revenue growth at the high end or slightly above the 3-4% range at constant currency rates." Oppenheimer's view is that investors should be prepared to profit once profit-taking becomes a reality, rather than waiting for upcoming financial reports to be a positive catalyst.

Additionally, Seeking Alpha analyst Uttam Dey believes that higher digital advertising revenue and growth in membership numbers are expected to increase Walmart's profit margin. Dey believes that Walmart's operating revenue compound annual growth rate can reach 9.6%, with a profit margin increasing by an average of about 20 basis points per year. However, as expectations are high and the market may consider Walmart's guidance improvement, Dey believes that if Walmart's guidance is conservative, the stock may fluctuate within a range for several months.

During the earnings conference call, Walmart is expected to discuss the unfavorable factors affecting profit margins for the remainder of the year, as well as details of the U.S. sales structure shifting from general merchandise to groceries and health care. Investors will also focus on whether Walmart's global advertising business can keep up with the strong 30% growth pace seen in Q1.

Options trading indicates that Walmart's stock price is expected to rise by 5% after the Q2 earnings release. Following Walmart's earnings report, the retail companies most correlated with its trading are BJ's Wholesale Club (BJ.US), Costco (COST.US), Ollie's Bargain Outlet (OLLI.US), and Best Buy (BBY.US). Analysts have also identified grocery store stocks Albertsons (ACI.US), Kroger (KR.US), and Sprouts Farmers Market (SFM.US) as three companies to watch They may react to Walmart's financial report. The ETFs with the highest exposure to Walmart include Consumer Staples Select Sector SPDR Fund ETF, Vanguard Consumer Staples Index Fund ETF, VanEck Retail ETF, and iShares US Consumer Goods ETF