Real Money Stock of the Day twice in the same week. Walmart (WMT) may be changing the game here, but that is commonplace for the company that changed bricks-and-mortar retail.
Our focus on Thursday shifts from NextDay free delivery to a solid earnings report.
Walmart breezed past earnings per share expectations by $0.11. The company reported $1.13 per share on revenue of $123.9 billion. Although revenue came up a billion shy of estimates, currency fluctuations drove the miss.
Excluding currency, Walmart would have reported $125.8 billion in constant currency revenue, so I view this as essentially in-line. While that isn't wowing, the bottom-line strength is impressive. The company also had another $0.20 unrealized gain thanks to an equity investment in JD.com JD, a favorite Chinese name of mine.
During the quarter, $2.1 billion in stock was repurchased equaling 22 million shares and $1.5 billion in dividends were distributed to shareholders. The company still has $9.2 billion remaining on its buyback authorization.
Sam's Club lacked domestic sale growth with Walmart International the only troubling portion of the business as net sales and operating income lagged. Flipkart weighed on operating income, but is a necessity to gain an international foothold. The good news is with Walmart's size, it's a blip on the radar.
Another factor that weighed on domestic sales was reduced tobacco sales. I do believe this trend will continue, but the good news is there is a product waiting in the wings that could dwarf tobacco sales: CBD. Expect non-THC CBD to replace tobacco sales starting potentially as early as next year.
Based on Thursday morning's report, I believe the reaction we've seen in the stock, currently up 3%, feels correct. Initially, I thought a move over $102 would trigger a breakout, but in reviewing the weekly chart I need to readjust that number to $104. In short, my initial take was wrong.
If WMT fails to close over $104 this week or next, then I would anticipate the shares getting stuck in a trading range of $97 to $104 for the next few months.
Secondary indicators remain bullish, so I'm more optimistic of a break above $104 with a move to $108-$110 rather than a pullback to $97.
There's nothing in this report that makes me bearish on Walmart. The retail market has enough room for Amazon (AMZN) , Walmart, and even Target (TGT) , in my view. Until the overall economy truly sours I'd be eyeing these names for long side trades.