Is WMT Stock a Buy on Earnings Plunge?

  • Walmart (NYSE:WMT) closed down by 11% today after announcing first-quarter results
  • The company reported a substantial drop in earnings compared to analyst expectations
  • Walmart has adjusted its annual outlook to reflect lower predicted profit
Image of Walmart (WMT) logo on Walmart store with clear blue sky in the background
Source: Jonathan Weiss / Shutterstock.com

Walmart is well in the red today after reporting a brutal earnings miss this morning. WMT stock is seeing losses of over 11% after announcing a 25% year-over-year (YOY) drop in quarterly earnings.

This morning, the retail giant offered its financial results for Q1. For the period, the company reported earnings per share (EPS) of $1.30, well below consensus estimates of $1.48 per share. This is the company’s first miss in five quarters, largely attributable to rising costs.

According to Walmart leadership, the drop in profit came as a surprise — and as a partial consequence of changes to spending habits amid this year’s market pullback. With rampant inflation, Walmart reported that lower-income shoppers are gravitating toward low-cost food, which offers weaker returns. President and CEO Doug McMillon commented on the quarterly performance:

“Bottomline results were unexpected and reflect the unusual environment. U.S. inflation levels, particularly in food and fuel, created more pressure on margin mix and operating costs than we expected. We’re adjusting and will balance the needs of our customers for value with the need to deliver profit growth for our future.”

Walmart did disclose a 3% rise in U.S. same-store sales during Q1. Meanwhile, gross margins in its American stores fell slightly because of higher fuel and delivery costs.

The company also adjusted its profit outlook for full-year 2022. Now it expects to see a 1% drop in EPS, worse than its previously expected “mid-single-digit increase” in profit.

WMT Stock Falls on Solid Trading Day

This news may come as something of a surprise to some WMT stock investors, especially after U.S. e-commerce data released earlier today showed a strong, nearly 1% rise in April retail sales. Walmart’s plunge comes on an otherwise strong day for the markets as well. The S&P 500 and Nasdaq Composite have each gained more than 2% today.

Walmart has generally been immune to the cold wave hitting the markets; prior to today’s drop, the company was up this year. Indeed, WMT has been one of the few bright points for an S&P 500 that is down nearly 15% year-to-date (YTD). WMT stock’s 11% losses mark one of the worst trading days for the retailer in recent memory.

On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines


Article printed from InvestorPlace Media, https://investorplace.com/2022/05/is-wmt-stock-a-buy-on-earnings-plunge/.

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