Earnings Preview: What Investors Can Expect from Walmart in 2Q16
Walmart Earnings Preview: What Investors Can Expect in 2Q16
Walmart’s anticipated performance in the second quarter of fiscal 2016
Walmart (WMT), the world’s largest retailer, will declare its 2Q16 earnings on August 18. In this series, we’ll analyze how Walmart’s stock has performed, the company’s growth drivers, and its expected results in 2Q16. In Part 4, you’ll also read about Walmart’s purchase of the remaining 49% interest in Yihaodian, its e-commerce venture in China.
Earnings drivers
Walmart’s larger US operations have been in the midst of a minor turnaround. In 1Q16, same-store sales rose for the third straight quarter in the Walmart US segment—the largest of Walmart’s three segments. The company’s US performance has benefited from lower energy prices and higher employment in the US economy . Store comps are projected to increase in 2Q16 as well. The company anticipates a 1% increase in comps for Walmart US.
Walmart’s e-commerce operations have also delivered above-category growth. Walmart’s the fourth-largest e-retailer in North America. Read more about Walmart’s expected sales performance in 2Q16 in Part 2 of this series.
However, growth investments, wage increases for staff, and a higher US dollar have taken their toll on the company’s results. We’ll analyze the earnings drivers and projections in greater detail in Part 5.
Stock performance
The above-mentioned headwinds have affected Walmart’s stock performance in 2015. The stock has underperformed peers and the broader indices. Total returns on Walmart year-to-date have come in at -13.9%, compared to 7.7% for Costco (COST) and 5.5% for Target (TGT). The S&P 500 Index (SPY)(IVV)(VOO) and the S&P 500 Food & Staples Retail Index (XLP)(XRT) have returned 2.6% and 3.6%, respectively, over the same period.
Walmart is a mega-cap stock. It makes up ~0.6% of the portfolio holdings in the SPDR S&P 500 ETF (SPY) and ~2.8% in the SPDR Dow Jones Industrial Average ETF (DIA).
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