stocks

Walmart Headlines Busy Week of Retail Earnings

Our preview of the upcoming week's earnings reports includes Walmart (WMT), Lowe's Companies (LOW) and BJ's Wholesale Club Holdings (BJ).

Quarterly updates from several of the country's top retailers will highlight this week's earnings calendar. Among the names set to report are mega-retailer Walmart (WMT, $130.52), home improvement specialist Lowe's Companies (LOW, $203.74) and discount store BJ's Wholesale Club Holdings (BJ, $68.92).

It's been a mixed earnings season so far. Through Aug. 5, three-quarters of S&P 500 companies exceeded analysts' average earnings per share (EPS) estimates. Furthermore, the 75% of S&P 500 companies that beat Wall Street estimates did so by 3.4%, on average. However, both beat rates were below the five-year averages of 77% and 8.8%, respectively, according to John Butters, senior earnings analyst at FactSet.

As for retailers, those in the consumer discretionary sector are reporting the biggest bottom-line misses – falling short of consensus estimates by 8.9%, on average, Butters says. Consumer staples stocks, on the other hand, are surpassing analysts' EPS expectations at an average rate of 4.8%.

Walmart's a Solid Choice, Despite Short-Term Troubles

When Walmart steps into the earnings confessional ahead of Tuesday's open, analysts, on average, expect the retailer to report earnings of $1.60 per share, down 10.1% on a year-over-year (YoY) basis. Revenue is projected to rise 7% to $150.8 billion.

But lackluster Q2 results from the world's largest retailer may already be priced into the stock. In late July, WMT shares tumbled after the company lowered its second-quarter and full-year guidance, saying higher food and fuel costs were hurting consumer spending.

Sign up for Kiplinger's FREE Investing Weekly e-letter for stock, ETF and mutual fund recommendations, and other investing advice.

"The trifecta of pressures facing consumers is accelerating (as has been noted by several retailers in recent updates), namely inflation, a normalization in wallet spend, and a slowing housing market, which combines with two years of elevated full-price selling and rising operating cost pressures," says Deutsche Bank analyst Krisztina Katai (Buy). 

Despite these near-term headwinds, Raymond James analyst Bobby Griffin maintains a "long-term favorable view" on the Dow Jones stock, and thinks its "defensible attributes alongside best-in-class omni-channel capabilities, financial strength and leadership leave it positioned well for better performance in the coming quarters." He adds that Walmart's "top-line momentum remains solid, with management raising its second-quarter and full-year sales outlook driven by continued market share gains in food and consumables."

Analysts Are Split Ahead of Lowe's Q2 Earnings Report

Lowe's Companies will report its second-quarter results the morning of Aug. 17. The company beat on its bottom line in Q1, but reported top-line results that fell short of what analysts were expecting. This time around, consensus estimates are for LOW to report earnings of $4.62 per share (+8.7% YoY) and revenue of $28.1 billion (+1.8% YoY).

Following a late-June call with management, Oppenheimer analyst Brian Nagel came away feeling "encouraged" about Lowe's ability to navigate through a post-pandemic consumer backdrop. "Given a still significant skew to do-it-yourself, LOW is well-positioned to capitalize upon a potential shift to DIY, should macro conditions deteriorate, rendering pro services less affordable," says Nagel, who rates the stock at Outperform. 

But not all analysts are as upbeat. CFRA Research analyst Kenneth Leon recently lowered his rating on LOW stock to Hold from Buy. "Home improvement spending is expected to see moderate growth in 2023 as sales of existing and new homes slow, mortgage rates rise, and limited house price appreciation dampens home remodeling," Leon writers in a note to clients. "We think higher cost of living for U.S. households could also weaken demand in Do-It-Yourself (DIY) and PRO segments. Building products and appliance costs are likely to stay high."

Higher Costs Expected to Pressure BJ's Q2 Profit

Warehouse clubs like BJ's Wholesale Club Holdings have been solid choices for investors in 2022. BJ stock is up roughly 3% for the year-to-date, compared to a more than 11% decline for the S&P 500.

BJ has shown strength off the stock charts, as well. In Q1, the company reported double-digit year-over-year growth on both its top and bottom lines. Analysts are anticipating solid revenue growth in its second quarter, as well, with the consensus estimate of $4.6 billion up 10% over the year-ago figure. However, earnings per share are expected to decline 4.9% to 78 cents.

This isn't too much of a surprise, however. During the company's first-quarter earnings call, CEO Bob Eddy said BJ's is still battling elevated supply chain and fuel costs, which can eat into profits.

Be that as it may, Deutsche Bank analyst Krisztina Katai (Buy) remains bullish. "We anticipate a second-quarter beat at BJ, stemming from solid comps (heavy grocery exposure) and better gas profitability, Katai writes.

BJ will report its second-quarter results ahead of Thursday's open.

Most Popular

What Are the Income Tax Brackets for 2022 vs. 2021?
tax brackets

What Are the Income Tax Brackets for 2022 vs. 2021?

Depending on your taxable income, you can end up in one of seven different federal income tax brackets – each with its own marginal tax rate.
September 20, 2022
Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
19 Best Stocks to Buy Now for High Upside Potential
stocks

19 Best Stocks to Buy Now for High Upside Potential

Finding the best stocks to buy when the market is selling off can be daunting, but the pros believe these 19 top-rated names are poised for big return…
September 23, 2022

Recommended

Stock Market Today (9/23/22): Dow Plummets 486 Points, Nears Bear Market
Stock Market Today

Stock Market Today (9/23/22): Dow Plummets 486 Points, Nears Bear Market

The selling wasn't confined to the equities market, with crude oil, gold and Bitcoin all suffering steep losses.
September 23, 2022
Kiplinger's Weekly Earnings Calendar
stocks

Kiplinger's Weekly Earnings Calendar

Check out our earnings calendar for the upcoming week.
September 23, 2022
19 Best Stocks to Buy Now for High Upside Potential
stocks

19 Best Stocks to Buy Now for High Upside Potential

Finding the best stocks to buy when the market is selling off can be daunting, but the pros believe these 19 top-rated names are poised for big return…
September 23, 2022
Stock Market Today (9/22/22): Stocks Fall as Global Banks Follow in Fed's Footsteps
Stock Market Today

Stock Market Today (9/22/22): Stocks Fall as Global Banks Follow in Fed's Footsteps

Treasury yields on the two-year and 10-year notes spiked to their highest levels in over a decade as central banks around the world rush to tame infla…
September 22, 2022