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Walmart beats Q1 2018 EPS estimates, issues strong Q2 view

The stock of retail chain Walmart Stores (NYSE: WMT) rallied more than 3% last Thursday to close at $77.54.

The steep rise in the share price was due to fiscal 2018 first-quarter earnings that surpassed the Wall Street estimates. The uptrend was also aided by a better than anticipated same-store sales. Walmart also stated that its e-commerce business grew 63% on y-o-y basis.

We expect the stock to scale new heights due to the facts discussed below. The stock of Walmart closed yesterday’s trading session at $78.55.

The Bentonville, Arkansas-based company reported a 1.5% increase in the fiscal 2018 first-quarter revenues to $117.54 billion, from $115.90 billion in the first-quarter of 2017. In the first-quarter ended April 2017, Walmart posted net income of $3.039 billion, or $1.00 per share, compared with $3.079 billion, or $0.98 per share, in the first-quarter last year. On average, earnings of $0.96 per share on revenues of $117.80 billion were expected by the FactSet analysts.

Walmart

Segment wise, Walmart US recorded 2.9% y-o-y increase in revenue to $75.44 billion. Sam’s Club revenue was $13.99 billion, an increase of 2.8% from $13.61 billion. However, Walmart International posted a 3.5% y-o-y decrease in revenues to $27.097 billion. Cash and cash equivalents at the end of April quarter was $6.545 billion.

Comp sales, or sales at stores which remained open for at least one year, increased 1.4%, versus analysts’ expectation of 1.3% growth.

To take competitors head on, Walmart is on an aggressive acquisition spree. Last year, the company acquired Jet.com, which is having a positive impact on the performance of the company. In 2017, Walmart had so far acquired Shoebuy, Moosejaw, and ModCloth. The company is also believed to be in talks to buyout Bonobos, a menswear label.

Walmart anticipates Q2 2018 earnings to be in the range of $1 to $1.08 per share. The estimate does not include an anticipated net benefit of approximately $0.05 from the divestment of Walmart’s Mexican clothing chain Suburbia. Analysts anticipate earnings of $1.07 per share in the second-quarter.

The company anticipates Q2 comp sales of its US subsidiary to increase between 1.5% and 2%. During the quarter, the company generated $5.4 billion in cash flow. Walmart also returned $3.7 billion to investors through dividends and share purchases. Strong performance and impressive second-quarter outlook is expected to keep the stock in a bullish orbit.

The historic chart indicates that the stock has broken the major resistance level of 75.30. The MACD indicator has made a bullish crossover above its zero line. Thus, we can expect the stock to reach the next minor resistance level of 82.

Walmart Stock: Price: May 23rd 2017

Walmart Stock: Price: May 23rd 2017

To benefit from the uptrend, we will consider purchasing a call option from a reliable binary broker. Before investing our surplus funds, we will make sure that the option has a validity period of one week and the stock trades near 78 in the equity market.


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