Walmart Reverses at Resistance After Strong Quarter

Dow component Walmart Inc. (WMT) is trading higher by less than 2% in Tuesday’s pre-market session after beating Q3 estimates and raising fiscal year 2022 earnings-per-share (EPS) guidance. The company reported a profit of $1.45 per-share, $0.05 better than expectations, while revenue rose 4% year-over-year to $140.53 billion, nearly $5 billion higher than consensus.  Same store sales rose by a healthy 9.2%, excluding fuel, beating 6.9% estimates by a wide margin.

Navigating Inflation and Supply Disruptions

The retail mega-cap did an excellent job navigating Q3 supply chain challenges and has now reported better-than-expected profits for three quarters in a row, defying predictions that lapping 2020’s near-panic buying would weigh on 2021 growth. The latest quarter looks especially good when combined with Q2 results, when Walmart blew away headline expectations with 14% EPS growth even though Wall Street consensus stood at roughly flat year-over-year performance.

Goldman Sachs analyst Kate McShane pounded the tables on Walmart’s 12-month outlook following a recent conference, adding the stock to the firm’s ‘Conviction Buy’ list while noting “We believe that Walmart was one of the strongest stories at the Goldman Sachs Retail Conference, given the company’s improving ability to grow [earnings before interest and taxes] along with continued investments, which … will gain investor attention as the company executes over the coming year.”

Wall Street and Technical Outlook

Wall Street consensus has stood at an ‘Overweight’ rating throughout 2021, now based upon 22 ‘Buy’, 5 ‘Overweight’, and 8 ‘Hold’ recommendations. No analysts are recommending that shareholders close positions and move to the sidelines. Price targets currently range from a low of $135 to a Street-high $196 while the stock is set to open Tuesday’s session about $20 below the median $170 target. This favorable placement, when combined with the solid quarter, could yield healthy upside.

Walmart broke out above 2018 resistance at 110 in 2019 and tested new support successfully during March 2020’s pandemic decline. The subsequent uptick stalled above 150 in September 2020, giving way to a trading range that’s still in force, more than 14 months later. The stock rallied into range resistance in Tuesday’s pre-market and pulled back, highlighting that persistent barrier, while slumping accumulation should give sellers a modest edge in coming sessions.

For a look at today’s economic events, check out our earnings calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.