Analysts estimate 8.7% net income gain for Walmart’s fourth quarter

Walmart has been one of the winners in retail amid the ongoing COVID-19 pandemic and Wall Street expects the retail giant will see net income grow 8.7% in its fiscal fourth quarter. The company reports earnings early Thursday (Feb. 18).

The consensus estimate is $1.50 per share, up from $1.38 earned a year ago. Sales are expected to grow 4.7% from a year ago at $148.3 billion for the quarter ending Jan. 31. For the full year, Wall Street expects earnings per share of $5.72, up 2.32% from the prior year. Annual revenue is expected to top $556.77 billion, up fractionally from last year.

Roughly half of the 32 analysts who follow Walmart are bullish on the retailer for the quarter, with eight of them ranking Walmart shares a “strong buy” and 7 ranking shares as a “buy” as of mid-February. There were 15 analysts with a neutral outlook for Walmart and a bearish seller emerged in the last month as analysts with R5 Capital downgraded the shares from a “hold” to a “sell” rating on Jan. 25.

On the flip side, analysts with RBC Capital recently upgraded Walmart shares to outperform or “strong buy” from a “ buy” rating at the first of the year. Analysts with Stephens Inc. also reiterated their strong overweight rating for Walmart shares on Tuesday.

“We continue to think Walmart remains well-positioned to advance on its strategic initiatives amid the COVID-19 pandemic, particularly as the company rolled out its Walmart+ program in September, which we expect will help the company maintain and grow its grocery market share,” noted Ben Bienvenu, an analyst with Stephens Inc.

Bienvenu said the departure of Walmart U.S. eCommerce CEO Marc Lore is disappointing given the “tremendous lift he helped to bring to the business.” That said, Bienvenu expects a seamless transition given the critical mass and momentum that the business has achieved.

“We have slightly moderated our fourth-quarter earnings estimates to reflect foreign exchange headwinds that came in higher than expected. We continue to be buyers of the stock and think Walmart’s value proposition to customers is attractive, with competitive price points and an increasing suite of services to reduce transaction friction,” he noted.

Stephens reiterated its overweight rating with a price target of $170 per share. (Stephens Inc. conducts investment banking services for Walmart and is compensated accordingly.)

Stephens’ updated estimate for fourth-quarter earnings is right at the consensus at $1.51 per share. Stephens projects same-store sales for Walmart U.S. to be up 5.1% with Sam’s Club posting comps at 8.9% from a year ago. E-commerce comp sales growth is expected at 60%, that will contribute 4.2% to the U.S. comp sales number. Sam’s Club is expected to report a 30% growth in eCommerce sales that contribute 2% to the comp numbers for the quarter. Stephens expects Walmart’s international sales to be down, modeling a 0.6% decline in revenue for the quarter from less favorable foreign currency exchange rates. Walmart’s gross margin is expected to be up 0.25% to 23.6% for the quarter.

Operating income for the quarter is pegged at $6.43 billion, up 9% from the year-ago period. For the full-year operating income is expected at $23.86 billion, up 11.4% from a year ago. Net income for the quarter is expected to be $4.277 billion, up 8.9% year-over-year. Fiscal 2021 net income is expected to be $19.878 billion, compared to $4.569 billion last year.

Shares of Walmart (NYSE: WMT) closed higher on Tuesday at $145.66, up $1.19. Over the past 52 weeks, Walmart shares have traded between $102 and $153.66 per share. Walmart executives will address the investment community on Thursday following the earnings release.