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May 15, 2018

Walmart preview: Amazon’s discount Prime membership may weigh on Walmart’s e-commerce results -May 14, 2018 | e-commerce results | MarketWatch

Walmart preview: Amazon’s discount Prime membership may weigh on Walmart’s e-commerce results

Tonya Garcia

Walmart Inc. has had a number of big announcements in the lead-up to its fiscal first-quarter earnings on Thursday, but analysts are waiting to hear if e-commerce has picked up steam again.
Walmart WMT, +1.21%   shares took a tumble after earnings were announced in February, with e-commerce growth dropping to 24% from 50% for the previous period. The stock closed down 10.2% that day.
MKM Partners analysts think Inc.’s AMZN, -0.09%   impact will be felt this quarter.
“While we expect some re-acceleration in 1Q18, we think management’s 40% guidance for FY18 may be a stretch with Amazon aggressively targeting SNAP [Supplemental Nutrition Assistance Program] and (more recently) Medicaid recipients (20% of the U.S. population) with discounted Prime memberships of $5.99/month,” Patrick McKeever wrote in a note.
MKM rates Walmart shares neutral.

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Walmart shares are down 16.7% for the past three months. It has an average overweight stock rating and average target price of $99.94, according to a poll of 33 analysts on FactSet.
Read: Companies like Shopify help smaller retailers compete in an Amazon world
Here’s what to expect:
Earnings: Walmart is expected to report earnings of $1.12 per share, according to FactSet consensus, up from $1.00 last year.
Estimize, which crowdsources estimates from sell-side and buy-side analysts, hedge-fund managers, executives, academics and others, expects per-share earnings of $1.14.
Walmart earnings missed the FactSet forecast for the last quarter, but exceeded expectations the nine prior quarters.
Revenue: FactSet analysts expect sales of $120.47 billion, up from $117.54 billion last year.
Estimize expects revenue of $120.77 billion for the quarter.
Walmart beat the FactSet revenue consensus the last three quarters.
Stock price: Walmart shares are down 14.2% for the year to date, but are up 12% for the last year.
The Dow Jones Industrial Average DJIA, +0.27%   is up 0.5% for 2018 so far, and up nearly 19% for the past 12 months.
Other issues:
-In recent weeks, Walmart has made international announcements, including its acquisition of a 77% stake in Flipkart, the leading e-commerce site in India. While the purchase is seen as a positive in the long-term, Amazon’s market share in India has grown over the last two years while Flipkart’s has declined.
Walmart also sold its British business, Asda Group Ltd. to J Sainsbury PLC SBRY, -0.62%  , in a deal that values the chain at $10.1 billion and set the stage for a focus on India.
See: Sainsbury’s CEO breaks into song over takeover of Walmart’s Asda grocery chain
- Walmart entered into an agreement with Postmates to bring online grocery delivery to 40% of U.S. homes, and with DoorDash to bring grocery delivery to the Atlanta metro area.
“[W]e expect both services to expand markets with Walmart and would expect to see a Walmart-owned delivery solution in well time,” wrote KeyBanc Capital Markets analysts led by Edward Yruma in a late April note. “Importantly, we believe Walmart’s dedicated staff (18,000 personal shoppers) gives the company a meaningful advantage over competitors (Amazon PrimeNow, Target-Shipt) that rely more heavily on non-store staff to pick.”
KeyBanc rates Walmart shares overweight with a $112 price target.
-There was also a report of talks between Walmart and Humana Inc. HUM, +1.72%   in The Wall Street Journal.
Also: Walmart’s potential Humana deal could connect your health insurance with the produce aisle
“We believe an outright acquisition would be modestly accretive to Walmart earnings and potentially additive to store traffic, though would also meaningfully increase business complexity and risks,” wrote Stifel analysts in an April 1 note.
Analysts said they thought an “expansion of an existing prescription drug plan partnership is most likely” since it would give Walmart a chance to learn more about the health-care industry and would contribute to Walmart’s traffic while potentially lowering costs.

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