Walmart Stock Reverses Lower After Walmart Earnings Beat On E-Commerce Surge - Investor's Business Daily

Walmart (WMT) reported better-than-expected third-quarter earnings, with e-commerce sales continuing to boom. But Walmart stock turned lower Tuesday.

Walmart Earnings

Estimate: Analysts saw Walmart earnings up 2.6% at $1.19 a share, according to Zacks Investment Research. They expected revenue of $132.4 billion, a 3.4% increase from the same period last year.

Same-store sales, excluding fuel and currency impacts, were seen up 4.3%, with Walmart U.S. comps up 3.8% and Sam's Club comps up 7.1%.

Results: Walmart earnings rose 17% to $1.34 a share, with revenue up 5.2% to $134.71 billion. Walmart U.S. comps climbed 6.4%, with Sam's Club same-store sales up 11.1% excluding fuel.

U.S. Walmart e-commerce sales skyrocketed 79% and Sam's Club online sales shot up 41%. During Q3, its Walmart+ membership delivery service went live, rivaling Amazon (AMZN) Prime, likely giving online sales a further bump.

"We think the service could be a game-changer for WMT, particularly given its size and scale in the U.S. grocery market, and U.S. consumers in general, eliminating the need for frequent trips to the grocery store," said CFRA analyst Garrett Nelson in a recent note.

Nelson also views favorably Walmart's deal to secure a 7.5% stake in TikTok for a reported price of $4.5 billion. That may help Walmart in the fast-growing "social commerce" space.

But management was mum on further Walmart+ details early Tuesday, and Amazon also launched a new online pharmacy service, providing consumers another reason to join Amazon Prime and potentially cutting into Walmart's drug sales.

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Walmart Stock

Shares dipped 0.2% to 152.07 in Tuesday's stock market trading, dipping back below a 151.43 buy point from a flat base after a Monday breakout, according to MarketSmith chart analysis. However, investors might have used 146.70 as the more active entry. Walmart stock also has an RS Rating of 77 and an EPS Rating of 79. Its Composite Rating is 86.

Rival Target (TGT), which reports earnings Wednesday, also reversed lower, lost 0.6%. Amazon climbed 0.6%.

Meanwhile, the Commerce Department reported Tuesday that October retail sales, excluding autos, rose 0.2% from the prior month, well below the consensus for a 0.5% gain.

Walmart is expected to benefit from an early start to the holiday shopping season this year. Retailers began offering promotions in early October. They're expected to spread out the deals as shoppers won't be able to crowd stores on a single day, like Black Friday, as they've done in the past.

The extended holiday shopping season offers Walmart the opportunity to build on the momentum it achieved shortly after the pandemic hit. Walmart was largely spared during the lockdowns as its stores were quickly deemed essential, since they sell groceries and health supplies. Its stores remained open while department stores like Kohl's and Macy's were closed.

Walmart Selling Seiyu

The world's top retailer on Monday agreed to sell most of its stake in Japanese retail chain Seiyu, with private equity fund KKR (KKR) acquiring a 65% stake and Rakuten taking 20%. Walmart will retain a 15% stake.

Seiyu has 331 stores, but the new partnership will focus on expanding its e-commerce. The company expects to close the deal in the first quarter of 2021. The agreement values Seiyu at $1.6 billion including debt, far lower than Walmart reportedly sought in 2018 ($2.7 billion to $4.4 billion), according to Japanese media reports.

Walmart had long struggled to break through in the highly competitive and saturated supermarket business in Japan. It first invested in Seiyu in 2002, reportedly spending more than $1 billion on the company.

Walmart's exit from Japan comes after it sold its U.K.-based supermarket chain Asda last month to a private investment group for $8.8 billion.

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