Walmart to Report Fiscal Q4 2024 Results Amid Expectations of Positive Growth
As the stock and bond markets observed President’s Day on February 19, 2024, retail giant Walmart (NYSE:) is gearing up to release its fiscal Q4 2024 financial results on Tuesday, February 20th. Shares of Walmart have seen an increase in value, reaching $170 per share, the same level it was trading at in mid-November 2023. The anticipation surrounding the upcoming earnings announcement stems from the disappointing Q3 2024 results, which saw the stock drop to $155 per share after missing on gross margin and delivering overall unsatisfactory results.
Analysts are expecting Walmart to report the following for fiscal Q4 2024:
– Revenue: $170.2 billion, representing a year-over-year (yoy) growth of 6%
– Operating Income: $6.761 billion, reflecting a yoy growth of 12%
– EPS: $1.65, indicating a yoy growth of 8%
The preceding quarter, Q3 2024, witnessed a revenue growth of 5%, flat yoy operating income growth, and a 2% yoy increase in EPS. However, there was a one-time litigation charge during this period that wasn’t well-explained, leading to some confusion among investors. Moreover, the EPS upside surprise in Q3 2024 was only 1%, the lowest in the past six quarters. Walmart has a history of providing cautious guidance and surpassing the estimates.
Looking ahead, current fiscal 2025 estimates anticipate a 9% yoy growth in EPS, a 3% yoy growth in revenue, and an 11% yoy growth in operating income. Walmart’s focus on productivity enhancement and cost reduction across the supply chain, including automation where feasible, is expected to drive margin improvement. Analysts believe that the retail giant has the potential to expand its operating margins by at least 100 basis points (bps). This perception is influenced by Walmart’s history of declining operating margins over the years, due in part to competition from Amazon.
When analyzing Walmart’s operating margin performance by calendar year, fiscal 2024 is poised to be the first year in the last 14 where the margin could potentially increase yoy. With the stock trading at $170 per share, Walmart’s valuation reflects a low 20x multiple, and the expectation of 9% average EPS growth from fiscal 2025 to 2027. The impact of supply chain automation and AI savings on EPS estimates is yet to be accurately gauged.
While Walmart’s revenue is largely driven by its grocery segment, which accounts for a significant portion of its total revenue, estimates put between 52% and 72%, the company continues to gain market share in this category. In fiscal 2025, Walmart is projected to generate $667 billion in revenue. The COVID-19 pandemic challenged the retail giant’s inventory management, leading to logistical complications. However, that period is now behind Walmart, and analysts anticipate improvements in store efficiency, labor, and supply chain savings to drive meaningful operating income and EPS growth.
While it is unlikely that Walmart will encounter a repeat of the gross margin and litigation charge issues experienced in Q3 2024, the truth will only be revealed in the Q4 2024 financial release on February 20th. Investors holding a 1% position in WMT stock may consider adding to their position over time. It is important to note that this information is not advice or a recommendation, and past performance is not indicative of future results. Investing carries the risk of a loss of principal, even in the short term.
Analyst comment
Positive news. Analysts anticipate positive growth for Walmart in fiscal Q4 2024, with expected increases in revenue, operating income, and EPS. Walmart’s focus on cost reduction and margin improvement, along with its potential to expand operating margins, is seen as a promising factor. The company’s ability to gain market share in the grocery segment and projected improvements in store efficiency and supply chain savings also contribute to the positive outlook. Investors may consider adding to their position in Walmart stock.
