Earnings Preview: Can Walmart Remain a Safe Haven Amid Weak Retail Sales?
Investing.com | May 17, 2023 13:41
- Walmart will announce Q1 2023 results tomorrow.
- The chain continues to boast low product prices even in the face of high inflation.
- The company's stock price remains in an uptrend, with a rally toward all-time highs likely.
Walmart (NYSE:WMT) is often considered a top choice for investors seeking reliable defensive stocks due to its extensive operations and consistent profitability. One of the retail behemoth's biggest advantages is its successful adoption of cutting-edge technology, particularly in automating warehouse processes and optimizing inventory and supply chain management.
Tomorrow, investors will be closely watching its quarterly results. The company is expected to report $1.32 EPS and $147.8 billion in revenue.
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Price Advantage Remains One of Walmart’s Key Strengths/h2
One of the key features of the big-box chain business is its relatively low margin, which allows it to generate regular profits while keeping prices low, mainly due to economies of scale.
This is important because consumers pay close attention to product prices when comparing competitors, especially in a period of high inflation.
According to DataWeave, which analyzed prices from early 2022 to February 2023, Walmart's average prices for a selected basket of nearly 600 products rose by only 3%.
This is much better than the average inflation rate and its closest competitors.
As evidenced by the ongoing downward trend in retail sales, the retail sector is currently facing a challenging environment. This situation affects not only Walmart but also the sector as a whole.
As the US economy enters a InvestingPro
While it is true that predictions further out have a greater margin of error, the primary goal is to highlight the potential uptrend.
Of Walmart's last 8 earnings results, 7 have beaten EPS estimates, indicating stronger-than-expected performance.
In addition, the company has consistently delivered positive surprises on the top line. This track record of earnings beats reinforces the overall positive sentiment around the company's performance.
Source: InvestingPro
Walmart: Technical View/h2
After a strong rally since mid-March, the bulls have encountered a formidable resistance zone at $154. If the stock is to sustain above $150, bulls need to defend the local support cluster within the $148-$149 range.
A potential break below $148 would trigger a more significant correction, expected to reach around $140. However, such a move would require a significant weakening in earnings and a further decline in retail sales.
On the other hand, if the uptrend continues, the target level will remain at the historical highs of around $161 per share.
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