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Will Walmart’s (WMT) Q4 Earnings Gain on E-Commerce Business?

Zacks

Walmart Inc. WMT, which is scheduled to report fourth-quarter fiscal 2020 results on Feb 18, has been benefiting from its e-commerce operations. The company has been firing on all cylinders to evolve with the changing consumer environment and stay firm against e-commerce giant Amazon AMZN. Strength in the e-commerce business, especially online grocery, has been driving Walmart’s top line, though its margins have been under pressure.

Walmart’s initiatives like buyouts, alliances, improved delivery and payment systems, and enhanced website have been boosting e-commerce sales. To this end, the company’s partnerships with Green Dot and Microsoft along with buyouts of ShoeBuy, Moosejaw, Bonobos, ModCloth and Jet.com, among others, have been noteworthy. Further, the 77% stake in Flipkart has been aiding Walmart’s e-commerce sales, though costs associated with this investment have been weighing on its operating income and bottom line.

Nonetheless, Walmart’s U.S. e-commerce sales have been gaining traction and are benefiting from its aggressive efforts to expand in the booming online grocery space. In this regard, Walmart’s deal with Postmates, buyout of Parcel, and alliance with Point Pickup, Skipcart, AxleHire and Roadie have strengthened its online grocery delivery service. Further, the company’s Walmart Pickup program enables customers to place orders online and then pick them up at a store for free. These actions help the company offer multiple choices to online grocery shoppers amid increasing competition from Amazon. By the end of the third quarter, Walmart U.S. had more than 3,000 pickup locations and more than 1,400 same-day grocery delivery locations.

The company earlier stated that it expects roughly 3,100 grocery pickup locations and about 1,600 grocery delivery locations by fiscal 2020-end. Further, the company expects U.S. e-commerce sales growth of 35% in the fiscal.

Walmart Inc. Price and EPS Surprise

Walmart Inc. Price and EPS Surprise

Other Trends

Walmart has been benefiting from its robust comparable store sales (comps) trend. To this end, this Zacks Rank #3 (Hold) company is focusing on enhancing merchandise assortments along with store expansions and remodeling to upgrade them with digital and other advanced innovation. Moreover, Walmart’s International segment has been performing well, especially thanks to Walmex. Further, comps have been gaining from a compelling pricing strategy, which however has been weighing on the margins. Additionally, the company’s margins have been under pressure due to costs associated with e-commerce investments and technological advancements, and the growing e-commerce mix.

The Zacks Consensus Estimate for fourth-quarter earnings has dropped over the past seven days to $1.43 per share. This suggests an increase of 1.4% from the year-ago period’s reported figure. The consensus mark for revenues is $142.5 billion, indicating a rise of 2.7% from the figure reported in the year-ago quarter. (Read More: Here's How Walmart is Positioned Ahead of Q4 Earnings)

Looking for Promising Retail Stocks? Check These

Costco COST, with a Zacks Rank #2 (Buy), has a long-term earnings per share growth rate of 8.1%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Burlington Stores BURL, also with a Zacks Rank #2, has a long-term earnings per share growth rate of 15.1%.

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