Walmart's Q4 Expectations: Can the Retailer Beat Them?

As Walmart (WMT) prepares to report its fourth-quarter earnings, analysts are bullish on the retail giant, with most holding "buy" ratings and an average price target of $107.76. However, the retailer's stock has only risen by about 8% so far this year, suggesting that investors may be waiting for Walmart's outlook for the next fiscal year before making significant moves. In this article, we will explore the factors contributing to the optimism surrounding Walmart's Q4 earnings expectations and assess the retailer's potential to exceed estimates.



Strong Sales Growth and Market Share Gains

Walmart is expected to report a nearly 4% year-over-year increase in revenue for the fourth quarter, reaching $180.2 billion. This growth is driven by a 7% increase in adjusted earnings per share (EPS) to $0.64. Additionally, Walmart has been gaining market share, particularly among upper-income households. In the third quarter of 2024, households making $100,000 or more accounted for 75% of Walmart's share gains (Walmart, 2024).

E-commerce Growth and Early Holiday Sales

Walmart's e-commerce sales have been growing rapidly, with a 22% increase in the U.S. during the third quarter of 2024. This growth is driven by the convenience and value offered by Walmart+, which has boosted membership revenue and e-commerce sales (eMarketer analyst Blake Droesch, USA TODAY). Walmart's early holiday sales events, such as the "Holiday Deals" event in October 2024, have been successful in attracting shoppers and driving sales. The company's expanded digital capabilities and early holiday sales event position it to capture a significant portion of the growing e-commerce market (Walmart, 2024).

Conservative Forecasts and Analyst Expectations

While analysts expect Walmart to beat Q4 estimates, the company is likely to maintain its conservative approach to forecasts for the next fiscal year. This strategy has historically helped Walmart exceed expectations and drive share price gains. Melius Research and Morgan Stanley analysts have recently lifted their price targets for Walmart stock, citing expectations that the retailer will continue gaining market share and topping analysts' estimates (Melius Research, Morgan Stanley analysts).

Conclusion

Walmart's strong sales growth, market share gains, e-commerce growth, and early holiday sales events contribute to the optimism surrounding its Q4 earnings expectations. The retailer's conservative approach to forecasts and analyst expectations suggest that it has the potential to exceed estimates. However, Walmart's ability to beat estimates will depend on its execution in capitalizing on these trends and maintaining its competitive advantages. As Walmart reports its earnings, investors will be watching closely to see if the retailer can deliver on the high expectations set for the quarter.