Is Walmart Stock a Buy Right Now Following Earnings Beat?

Walmart Stock

Walmart (WMT) is the world’s biggest private-sector employer and a retail powerhouse. Is a buy call prudent for Walmart stock (NYSE:WMT) after they report earnings?

Walmart Issue Profit Warnings

Walmart stock (NYSE:WMT) dropped after the company issued a profit warning on July 25.

It expects adjusted profits per share to decrease from 11% to 13% for the whole year, compared to a 1% reduction predicted in May.

In modifying its expectations, the business noted: “pricing changes focused on improving inventory levels at Walmart and Sam’s Club in the United States.”

Following the warning, Walmart reported earnings per share of $1.77 on August 16. This was more than analysts’ expectations of $1.62 per share. Revenue of $152.9 billion also exceeded projections.

The increase in revenue is mostly the result of increased pricing and rising expenses.

“The efforts we’ve taken to reduce inventory levels in the United States, along with a greater mix of sales in groceries, placed pressure on profit margins for the second quarter and our year-end projection,” CEO Doug McMillon said in a statement.

Walmart executives told investors on Tuesday that the company canceled billions of dollars in orders to better match inventory levels with projected demand. Despite fewer items and higher costs, Walmart said that “mid-to upper-income clientele” are flocking to its shops.

It also revised its projection, predicting that full-year adjusted EPS would fall by 9%-11%. Walmart anticipates a 5% increase in net sales and a 9%-11% fall in adjusted EPS in the third quarter.

Walmart Stock Evaluation

Walmart stock (NYSE:WMT) is now trading at the lows of a consolidation pattern. According to MarketSmith, the purchase point here is 160.87.

Walmart stock (NYSE:WMT) has just dropped below its 50-day moving average, which is not good. WMT stock is also trading below the longer-term 200-day moving average.

Walmart’s relative strength line is improving but is still not ideal. It has generally been declining since late November 2020. Despite recent advances, it is still below its year highs. This line compares a stock’s performance to that of the S&P 500.

Walmart stock (NYSE:WMT) has dropped roughly 9% since the beginning of the year. This is an improvement over the S&P 500’s 24% drop. However, WMT trailed the index in 2021.

Longer term, Walmart trailed the S&P 500 throughout the extended bull market. In other words, if you had purchased the SPDR S&P 500 ETF (SPY) instead of Walmart in 2009, you would have made a larger profit.

Is Walmart Stock a Good Investment?

For many years, Walmart stock has not been a long-term stock market leader. It trailed the S&P 500 in 2021 but outperformed in 2022.

The stock (NYSE:WMT) is still trading significantly below its most recent purchase target and well below its year-to-date highs. Furthermore, due to its subpar fundamentals, Walmart stock (NYSE:WMT) is unlikely to gain significantly.

Featured Image – Unsplash © Marques Thomas

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About the author: Okoro Chinedu is a freelance writer specializing in health and finance, with a keen interest in cryptocurrency and blockchain technology. He has worked in content creation and digital journalism. Since 2019, he has written on various online platforms, and his work has been recognized by several important media sources and specialists in finance and crypto. In addition to writing, Chinedu enjoys reading, playing football, posing as a medical student, and traveling.