Were Walmart Earnings Really That Good?

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Walmart Inc. (NYSE: WMT) reported fourth-quarter and full-year fiscal 2019 results before markets opened Tuesday morning. The retailing giant posted quarterly adjusted diluted earnings per share (EPS) of $1.41 on net sales of $138.79 billion, excluding membership fees in Sam’s Club. In the same period a year ago, Walmart reported EPS of $1.33 on sales of $136.27 billion. Fourth-quarter results also compare to consensus estimates for EPS of $1.33 and $138.65 billion in sales.

For the full year, Walmart reported adjusted EPS of $4.91 and revenues of $514.4 billion, compared with prior year EPS of $4.42 and revenues of $500.3 billion. Analysts had been looking for EPS of $4.84 and revenues of $514.32 billion.

GAAP EPS in the quarter totaled $1.27, including a $0.17 charge related to changes in the tax law. For the full year, GAAP EPS of $2.26 included a charge of $1.54 related to the sale of a majority stake in the company’s Brazilian stores, a loss of $0.95 on Walmart’s investment in JD.com and $0.16 related to tax law changes.

CEO Doug McMillon commented:

Progress on initiatives to accelerate growth, along with a favorable economic environment, helped us deliver strong comp sales and gain market share. We’re excited about the work we’re doing to reach customers in a more digitally-connected way. Our commitment to the customer is clear – we’ll be there when, where and how they want to shop and deliver new, convenient experiences that are uniquely Walmart.

Walmart guided fiscal-year 2020 sales growth of at least 3% in constant currency and same-store sales growth at its U.S. stores of 2.5% to 3.0%, excluding fuel. International sales growth is forecast at around 5% in constant currency. EPS is forecast down by a low-single-digit percentage and adjusted EPS is forecast to increase by a low- to mid-single-digit percentage range, excluding the company’s Flipkart stores in India. Walmart said its 2020 capital budget of about $11 billion will focus on remodeling stores, customer initiatives and technology. The company expects to open fewer than 10 new U.S. stores, while more than 300 new stores are expected open internationally, primarily in Mexico and China.

Walmart also announced an increase of $0.04 to its annual dividend, bringing the total to $2.12 per share.

Investors lifted the share price by about 5% in Tuesday’s premarket session, to $104.85 in a 52-week range of $81.78 to $106.21. The 12-month consensus price target on the stock is $106.93.

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