It has been about a month since the last earnings report for Walmart (WMT Quick QuoteWMT - Free Report) . Shares have lost about 3.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Walmart due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Walmart Q1 Earnings & Revenues Top Estimates, View Raised

Walmart posted robust first-quarter fiscal 2022 results. Adjusted earnings came in at $1.69 per share, which cruised past the Zacks Consensus Estimate of $1.22. Moreover, the figure surged 43.2% from adjusted earnings per share of $1.18 reported in the year-ago period. Total revenues grew 2.7% to $138.3 billion. On a constant-currency or cc basis, total revenues advanced 2.1% to $137.4 billion. The consensus mark stood at $131.3 billion. We note that revenues were hurt to the tune of about $4.2 billion by recent divestitures related to the Walmart International business.

Consolidated gross profit margin expanded 104 basis points (bps) to 24.7%, mainly accountable to strength in the Walmart U.S. segment. Gross margin at Walmart U.S. grew 142 bps on favorable mix shifts in general merchandise as well as reduced markdowns. Apart from these, better comparisons with the year-ago period aided the Walmart U.S. gross margin. Consolidated operating income advanced 32.3% to $6.9 billion, courtesy of the overall company strength. Operating income at cc jumped 31.3% to $6.9 billion. Consolidated operating expenses, as a percentage of sales, remained relatively flat year over year. Walmart ended the quarter with cash and cash equivalents of $22.8 billion, long-term debt (including lease obligations) of nearly $57 billion and total equity of $84.6 billion.  

Walmart U.S.: The segment’s net sales grew 5% to $93.2 billion in the quarter. U.S. comp sales, excluding fuel, improved 6% on the back of a 9.5% rise in ticket, partly negated by a 3.2% fall in transactions. Comp sales exceeded expectations, thanks to gains from stimulus. Comp sales continued to gain from strength in general merchandise and health & wellness categories. The grocery category saw a decline in comp sales as the year-ago period saw a major surge in demand due to initial stock hoarding. Walmart continued to see customers consolidating their shopping trips, leading to a bigger average basket size. Also, the company continued seeing an increased shift toward e-commerce. Additionally, comparable transactions declined lesser than previous quarters. E-commerce sales drove comps by 360 bps. E-commerce sales in the segment soared 37% with strength across all channels. Notably, marketplace and store pickup & delivery remained robust. As of the first quarter, Walmart U.S. had 3,800 pickup locations and more than 3,200 same-day delivery stores. The company remodeled 89 stores during the quarter. Operating income at the Walmart U.S. segment grew 26.8% to $5.5 billion.

Walmart International: Segment net sales fell 8.3% to $27.3 billion, including positive currency impacts of about $0.9 billion. However, recent divestitures hurt segment sales by 4.2 million. At cc, net sales dropped 11.4% to $26.4 billion. Also, pandemic-related government limitations in select regions affected results. Nonetheless, strength in Flipkart and Canada were upsides. E-commerce sales had a contribution of 16% to total segment sales. Operating income (at cc) surged 41.8% to $1.1 billion.

Sam’s Club: The segment, which comprises membership warehouse clubs, witnessed a net sales rise of 10.1% to $16.7 billion. Sam’s Club comp sales, excluding fuel, grew 7.2%. Comp sales were partially hurt by lower tobacco sales to the tune of around 340 bps. While transactions grew 2.2%, ticket rose 4.9%. Membership income rose 12.7% in the quarter, with the total member count being at an all-time high. This, in turn, was a result of higher renewal rates, including increases in Plus renewal rates as well as Plus penetration rates. Further, first-year member renewals soared considerably. E-commerce fueled comps by 310 bps. Markedly, e-commerce sales jumped 47% at Sam’s Club on the back of a robust direct-to-home show and solid curbside performance. Segment operating income came in at $0.6 billion, up 16.4% year over year.

Guidance

Walmart raised its guidance for fiscal 2022. Consolidated net sales in fiscal 2022 are now anticipated to decline in low-single digits (at cc). Excluding divestitures, management expects consolidated net sales growth in low-to-mid-single digits. Earlier, consolidated net sales were anticipated to decline at cc. Excluding divestitures, management previously expected a low-single-digit rise in consolidated net sales. Comp sales in both Walmart U.S. (excluding fuel) and Sam’s Club (excluding fuel and tobacco) are still expected to rise at a low-single-digit rate. Net sales in the Walmart International segment are now anticipated to tumble 20-25% at cc due to divestitures. Excluding the impact of divestitures, net sales are likely to grow in mid-single digits. Earlier, net sales in the Walmart International segment were anticipated to decrease at cc. Excluding the impact of divestitures, the growth rate was likely to be higher in the International segment than in the U.S. segment.

Consolidated operating income is now expected to rise in mid-single digits (at cc), while it is anticipated to jump high-single digits excluding divestiture impacts. Prior to this, consolidated operating income was forecasted to drop marginally at cc, while it was anticipated to be flat to slightly up on excluding divestiture impacts. Consolidated operating income in Walmart U.S. is anticipated to grow in high-single digits now, up from slight growth anticipated earlier. Finally, Walmart envisions high-single-digit growth in adjusted earnings per share for fiscal 2022. Excluding divestitures, the same is anticipated to jump low-double digits. Earlier, Walmart projected a marginal decline in adjusted earnings per share for fiscal 2022. Excluding divestitures, the same was anticipated to be flat to slightly up.

For the second quarter of fiscal 2022, the company anticipates comp sales (excluding fuel) in Walmart U.S. to increase in low-single digits. Consolidated operating income is now likely to decline in the low to mid-single-digit range in the second quarter, while the same is expected to increase slightly on excluding divestitures. Earnings per share for the second quarter are anticipated to fall in low-single digits, while the same is anticipated to increase in low-single digits on excluding divestitures. Earlier, both consolidated operating income and earnings per share were projected to decline in the mid to high-single-digit range.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month.

VGM Scores

Currently, Walmart has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Walmart has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.