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Investors shop for Walmart shares on profit beat

 

Wednesday, February 21, 2024

Today’s headlines

What’s happening: Shares of Walmart gained on Tuesday, after the company reported results for its fourth quarter.

What happened: The retail giant reported better-than-expected earnings for its latest quarter and announced the biggest dividend hike in more than a decade.

Walmart also announced plans to buy smart-TV maker Vizio for $2.3 billion.

How were the results: The Bentonville, Arkansas-based company reported single-digit growth in sales for its fourth quarter ended January 31.

  • Net sales grew 5.7% year-over-year to $173.39 billion, beating the consensus estimates of $170.71 billion.
  • Adjusted earnings came in at $1.80 per share, which topped Wall Street expectations of $1.65 per share.

Why it matters: Walmart kicked off the earnings season for US retailers, reporting strong results for the fourth quarter. Although the US economy is seeing a broad slowdown in consumer discretionary spending, the company’s focus on groceries lent support to its overall results.

Walmart kept prices for grocery lower, which attracted more footfall to its stores. US net sales rose 3.4% year-over-year during the quarter, while sales of Walmart International and Sam’s Club US climbed 17.6% and 2.0%, respectively.

Walmart’s total US comp sales, excluding fuel, increased by 4.0%, with a 17% surge in ecommerce.

Walmart announced plans to acquire smart-TV maker VIZIO Holding Corp for $11.50 per share in cash, which represents a fully diluted equity value of around $2.3 billion. The offer price is at a 47% premium to Vizio’s closing price on February 12.

The company’s board also announced an annual cash dividend of 83 cents per share for fiscal year 2025 on a post-stock split basis, or $2.49 per share on a pre-split basis, which represents an increase of around 9% from the previous fiscal year.

Management guided to consolidated net sales (constant currency) growth of 4.0%-5.0% and adjusted earnings of $1.48 to $1.56 per share on a pre-split basis for the first quarter. For fiscal 2025, they projected consolidated net sales growth of 3.0%-4.0% and adjusted earnings of $6.70 to $7.12 per share pre-split.

How shares responded: Walmart’s shares climbed 3.2% to close at $175.86 on Tuesday, following the release of quarterly results. The stock has gained around 8% over the past month.

What to watch: Investors will continue monitoring overall inflation levels and the impact of this on consumer discretionary spending.

The markets today

The British pound will be in focus today ahead of a couple of major economic reports

Context: The GBP/USD forex pair rose on Tuesday after declining around 0.25% last week.

Details: Investors continue to monitor the Bank of England’s monetary policy outlook, with traders widely expecting rate cuts of about 70 basis points (bps) this year. This marks a reduction from the earlier projections of around 110 bps. Traders now expect the BoE to announce its first rate cut in June.

Data released last week showed UK inflation coming in unchanged at 4% in January, compared to market expectations of an increase. However, the latest reading remained much higher than the central bank’s 2% target.

The British pound has been on a recovery mode over the past couple of weeks. The GBP/USD is now lower by only around 0.8% year to date, versus down around 1.5% year-to-date just two weeks ago.

Some weakness in the US dollar also lent support to the GBP/USD forex pair on Tuesday. The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell around 0.2% to 104.08.

The GBP/USD gained more than 0.2% to 1.2622, while the EUR/GBP forex pair rose around 0.1% to 0.8564 on Tuesday. London’s FTSE 100 fell 0.12% to close at 7,719.21.

What to watch: Investors await the release of economic data on public sector net borrowing and CBI industrial trends orders from the UK today. Analysts expect the Confederation of British Industry survey’s total order book balance to improve to a reading of -27 in February, from -30 in January.

Other Markets: US trading indices closed lower on Tuesday, with the Dow Jones index, S&P 500 and Nasdaq 100 down by 0.17%, 0.60% and 0.79%, respectively.

The news shaping the markets

Some White House officials said that the US plans to impose a major sanctions package against Russia on Friday. The news sent the RUB/USD pair lower in forex trading this morning.


Australia’s wage price index rose by 4.2% year-over-year in the fourth quarter, versus a 4.1% increase in the prior quarter, which lent support to the AUD/USD forex pair.


Japan’s trade deficit shrank to ¥1,758.311 billion in January, from ¥3,506.43 billion in the year-ago period. The figure coming in better than market expectations of ¥1,925.9 billion sent the JPY/USD higher lower in forex trading this morning.


New Zealand’s producer input prices increased by 0.9% in the fourth quarter, following a 1.2% rise in the prior quarter, lending support to the NZD/USD forex pair.


South Korea’s Business Survey Index for the manufacturing sector declined to 70 in February, from the prior month’s reading of 71, which sent the KRW/USD pair lower in forex trading this morning.

What else to watch today

Saudi Arabia’s balance of trade, Turkey’s consumer confidence index, Indonesia’s value of loans and Bank of Indonesia interest rate decision, Eurozone’s consumer confidence indicator and European Central Bank’s non-monetary policy meeting, South Africa’s inflation rate, India’s money supply M3, Mexico’s retail sales, US MBA mortgage applications, Redbook index, FOMC minutes and API crude oil stock change, Canada’s new housing price index, as well as Russia’s producer price inflation.


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