Tuesday, August 18, 2020

Investors Shop for Walmart Shares Ahead of Results

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News shaping
the markets today

     

What’s happening: Walmart is scheduled to report its second-quarter results before the opening bell in the US markets today.

What happened: While most retailers in the non-essential segment are struggling to survive in the covid-19 crisis, Walmart’s business has been booming.

Investors are excited heading into the retail giant’s quarterly earnings, sending its stock to a new high on Monday.

What are expectations: Walmart is expected to report some growth in revenue and a slight decline in earnings for the second quarter.

  • Analysts expect revenues to grow 2.7% to $133.89 billion.
  • US comparable sales are projected to rise 5.4% in the second quarter.
  • The company is expected to report quarterly earnings of $1.26 per share, representing a 0.8% decline from the same quarter last year.

Why it matters: Ecommerce has been on an uptrend during the pandemic, with people continuing to order necessary items online.

While some brick-and-mortar retailers have suffered, Walmart’s physical outlets were quick to offer curbside pickup facilities. Customers can shop for groceries on the company’s website or via the Walmart Grocery app, while mentioning their preferred pickup time. Walmart employees bag the listed items and cart them to the customer’s car at the appointed time.

Despite some states re-imposing restrictions due to a rise in infections, sales at Walmart have not shown any signs of a slowdown. Also, the back-to-school shopping season being much more sluggish has not significantly dampened Walmart’s projections, although most of the sales are likely to be made online.

In fact, the company gained new customers amid the pandemic and is taking initiatives to retain them.

Investors are also optimistic about the potential launch of the company’s subscription service, Walmart+, which will allow the company to be better positioned as it competes with Amazon’s Prime service. Walmart’s recent announcement of teaming up with Instacart is also expected to boost its grocery business.

How shares performed so far: Shares of Walmart hit a new 52-week high of $136.13 on Monday, before settling at $135.60, gaining 2.3% for the day. The stock has climbed only 8% over the past three months, versus the 32% jump in Amazon’s shares.

What to watch: Investors expect Walmart’s business to exhibit stronger signs of growth, as the retailer takes initiatives like promo codes, special offers for new customers and the launch of express delivery. Markets will also keep an eye on how the partnership with Instacart is progressing as well as the company’s launch of its new subscription service.

The Markets Today

     

US stocks will be in focus today, ahead of the economic reports scheduled for release during the day.

Context: US stocks closed mostly higher on Monday, with the S&P 500 settling near a record high. However, the stalemate over the new coronavirus stimulus bill pushed the Dow Jones index lower in yesterday’s session.

Details: The previous unemployment benefits of $600 per week was terminated at the end of July. The Democrats and Republicans have replaced decision making with name calling and finger pointing, and it is unclear when the vote on the new stimulus package will be scheduled. By now, the markets are growing increasingly concerned about if, rather than when, the vote takes place.

On the economic data front, the NY Empire State manufacturing index declined 13.5 points to 3.7 in August, showing a slower pace of growth, versus expectations of a reading of 17. Sentiments were supported by the home-builder confidence data, with the NAHB’s housing market index rising 6 points to 78 in August.

Moreover, coronavirus cases seemed to show signs of a slowdown in the US, with only 42,000 new infections on Sunday.

The Dow Jones index lost 86.11 points to close at 27,844.91 on Monday, still 5.8% away from its record close. The S&P 500 index gained 0.3% to end the trading day at 3,381.99, just 0.1% away versus its all-time closing high of 3,386.15.

The Nasdaq 100 jumped 1% to close at 11,129.73 on Monday, notching its 33rd record settlement for the year.

What to watch: Investors await data on housing starts and building permits from the US. Housing starts are expected to increase at an annualized rate of 1.24 million in July, while building permits are likely to rise to 1.32 million.

Markets will continue to assess the covid-19 figures, with total cases surpassing 5.4 million in the US.

Other Markets: European indices were trading lower at 8:30am GMT, with the FTSE 100, French 40 and Dax 30 index down by 0.7%, 0.6% and 0.5%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Russian producer prices as well as the US Redbook index and API crude oil stockpiles.