Walmart shares under pressure after surprisingly weak 2023 outlook 📉

Wall Street ignored sharply better-than-forecast results from analysts for the largest US supermarket chain Walmart (WMT.US) for Q4 2022 though and focused attention on forecasts. The company's conservative estimates negatively disappointed investors, raising concerns around expected lower consumer activity. As a result, shares like Home Depot (HD.US) are already losing close to 3% before the US market open. 

Revenues: $164 billion vs. $159.7 billion forecast (FactSet) (up more than 6.7% y/y)

Earnings per share (EPS):$1.71 vibec $1.52 forecasts (FactSet)

What's good?

• Walmart once again increased market share in grocery sales, the company reported growth in all business segments, and once again significantly reduced the inventory drag on margins. In the U.S., comparable sales rose more than 8% with a surprisingly strong 13% growth in electronic sales from e-commerce. The company's global advertising business grew nearly 30%, led by a 41% increase in the US (WalMart Connect);
• The Sam's Club brand did well, with a record number of members. Walmart International's net sales were $27.6 billion (up $2.1 with a negative impact from currency fluctuations). Sales in constant currency were $28.5 billion, up 5.5%, led by the US, China and Canada;
• The company generated $29.1 billion in operating cash flow and returned $16.0 billion to shareholders through dividends and share repurchases;
• Operating expenses (as a component of net sales) fell 4.4%, thanks to strong sales growth and lower Covid-related costs, partially offset by reorganization and restructuring costs incurred in the international segment. 

But...

Through price cuts, gross profit margins fell (8.3% year-on-year decline), and operating income also declined ($5.6 billion, down 5.5%). Forecasts were particularly disappointing - in Q1 2023 Walmart sees earnings per share between $1.25 and $1.30, while sales are expected to grow 4.5-5%. Analysts had expected earnings of $1.36 per share. In addition, for the full year 2023, the company forecasts earnings per share in the range of $5.90-$6.05, well below the consensus of $6.50. Estimated full-year sales growth will be around 2.5-3%. Goldman Sachs pointed out that it was the disappointingly weak forecasts that weighed on investor sentiment, not offset by strong fourth-quarter results. According to Stifel analysts, there is a chance that sales will not last long because the company significantly beat its EPS forecast, in a difficult market environment.

Walmart (WMT.US), H4 interval. Pre-opening trade indicates a start of trading near $140 per share, where bulls will try to hold above the 38.2 Fibonacci abolition of the upward wave initiated in May 2022. However, a drop below the 23.6 Fibonacci retracement and the SMA200 (red line) could herald a longer weakness, both levels from support will become resistance. Source: xStation5