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How will the Walmart share price react to Q2 earnings?

Walmart share price: Walmar'ts logo on the side of one of its stores

Ahead of Walmart’s Q2 results release on Tuesday 17 August, the Walmart [WMT] share price has gained almost 5.6% over the last month, in what has been a choppy year for the shares.
There is a school of thought that suggests the US retail giant’s second-quarter expectations could be a little too high, given the more subdued nature of US retail sales in recent months.

Walmart share price recovers from March lows

Despite that decent monthly rise, Walmart’s share price has only managed to climb 2.05% year-to-date. However, that modest gain doesn’t tell the whole story, after the stock sank to a 52-week low at $126.28 on 4 March this year. Since that nadir however, Walmart’s share price has moved 18.4% higher to $149.53 at the close on Friday 13 August.

Walmart has been leveraging the increasing popularity of online services, announcing the launch of Walmart+ in Q3 last year, a new membership service to help it compete with the likes of Amazon and its Prime service.

Walmart is also looking to diversify away from retail and into healthcare, having acquired MeMD earlier this year as it looks to widen its scope into healthcare beyond basic in-store pharmacy services. Investors and analysts will look out for further updates on these new areas of business.

E-commerce sales drive Q1 earnings

In Q1, Walmart saw its numbers continue where they left off at the end of its previous fiscal year, with e-commerce sales continuing to drive the business forward. Last year full-year revenue hit $559bn, as e-commerce sales rose in every single quarter.

This continued in Q1, with another 37% rise helping to push total revenue to $138.1bn, helped to a large extent by the March stimulus payments. Profit also beat estimates, crushing expectations of $1.21 earnings per share after coming in at $1.69, prompting the company to upgrade its full-year guidance. Same-store sales rose 6%, well above expectations of 0.9%.

Tough comparatives may affect Walmart share price

As with other retailers, business costs have eaten into the top line as extra staff were hired to help clean stores, stack shelves and get online orders out of the door. In total the company hired in excess of an extra 500,000 people last year alone.

Tougher comparatives from this time last year could also test shareholder confidence, and have the potential to affect Walmart’s share price if the bottom line fails to meet consensus estimates. Profit is expected to come in at $1.54 a share.

How will the Walmart share price react when the retailer releases its second-quarter results before the US market open on Tuesday 17 August?

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