Here’s what Wall Street experts are saying about Walmart ahead of earnings

Walmart to report Q1 earnings before the market opens Thursday

Walmart (WMT) is scheduled to report results of its first quarter before the market open on Thursday, May 18, with a conference call scheduled for 8:00 am EDT. What to watch for:

GUIDANCE: In February, Walmart forecast Q1 adjusted earnings per share of $1.25-$1.30 on revenue up 4.5%-5% and operating income up 3.5%-4%. Analysts currently expect EPS of $1.32 on revenue of $148.65B. For fiscal 2024, Walmart expects adjusted EPS of $5.90-$6.05 on revenue up 2.%-3% and U.S. comparable sales up 2%-2.5%. Analysts currently expect EPS of $6.15 on revenue of $632.99B. Guidance was reiterated at April’s Investment Community Meeting.

In February, Walmart said it believed sales growth would be the strongest in the first half of the year and would moderate in the second half. The company commented that amid a "great deal of uncertainty" this year, gross margin levels would be "up" in FY24, but not back to fiscal 2022 levels. At the same time, Walmart said it expected operating income growth to outpace sales growth in FY24. CEO Doug McMillon told CNBC that Walmart’s inventories are in good shape and the company is working with suppliers to get inflation down as soon as possible.

Truist is positive on the company’s "favorable defensive positioning" and the potential acceleration in its earnings growth algo in 2024 and beyond, though the management’s recent investor meetings suggest that it is increasingly cautious in its view of the "consumer" and expects the sales mix shifts to weigh on profitability. Meanwhile, Morgan Stanley said that the firm’s latest AlphaWise Consumer Pulse Survey indicates that Walmart+ has reached a "record" 20M members, or about 15.5% U.S. household penetration, which is up 700,000 members from the firm’s prior survey.

‘INFLECTION POINT’ FOR RETURNS: At the 2023 Investment Community Meeting, Walmart said it sees an "inflection point" for returns after a CapEx increase. Management said Walmart is targeting an annual increase in ROI.

DA Davidson said that the company’s reiterated earnings guidance is favorable while potentially still leaving some room for upside Walmart’s Investment Community meeting showed off its supply chain muscle, which included more distribution center automation that will eventually improve throughput, lower costs, leverage expenses and enhance efficiency, the analyst said. Wells Fargo would be a buyer of Walmart following the bullish investor-day, saying that the retailer looks to be on the cusp of capturing the margin upside of advanced tech investments.

CAPITAL ONE PARTNERSHIP: Walmart filed a lawsuit in April in order to end a credit-card partnership with Capital One Financial (COF) early, alleging that Capital One didn’t provide the customer service it was obligated to offer. The case was filed in the Southern District of New York. A Capital One spokesman told The Wall Street Journal: "These immaterial servicing issues were cured by Capital One pursuant to the terms of the agreement, without harm to customers, the program, or Walmart."

BofA said the overhang from the lawsuit "could make it difficult to maximize the value of the partnership for both sides."

TRAFFIC INFLECTS HIGHER: Gordon Haskett upgraded Walmart to Buy from Accumulate with a price target of $165, up from $155. When the firm previously upgraded the stock in early February, it cited the expectation that traffic trends would begin to inflect higher, "which is now beginning to manifest," the analyst told investors. Walmart’s foot traffic growth improved sequentially in April by 1,120 basis points to 0.7% on a four-year basis, outperforming the firm’s coverage and broader retail, notes Gordon Haskett, which thinks the company is likely benefiting from increasing wallet share from core customers in a softening macro backdrop and gaining share with higher-income customers.

SENTIMENT: Click here to check out recent Media Buzz Sentiment on Walmart as measured by TipRanks.

Keywords: earnings, quarterly earnings, earnings report, guidance, Q1