Walmart (NYSE:WMT) earnings report review for the 3rd quarter of their 2021 financial year
Category: Stock Market and Walmart (WMT)
Date: 24 November 2020
Stock Price of Walmart (WMT): $150.93
We take a look at the 3rd quarter 2021 earnings report of the world's largest bricks and mortar retail group, Walmart. Walmart employs roughly 2.2 million people and have over 11 200 stores across the globe. The group reported revenues of $134.7 billion and net income of $5.1 billion.
More About Walmart
This was another strong quarter on the top and bottom line. Our associates continue to impress during this challenging year. They are working together to serve customers and communities in new, relevant ways and we're very proud of them. We think these new customer behaviors will largely persist and we're well positioned to serve customers with the value and experience they're looking for - Doug McMillon President and CEO, Walmart"
​What started small, with a single discount store and the simple idea of selling more for less, has grown over the last 50 years into the largest retailer in the world. Each week, nearly 265 million customers and members visit our more than 11,200 stores under 55 banners in 27 countries and eCommerce websites in 10 countries. With fiscal year 2018 revenue of $500.3 billion, Walmart employs over 2.2 million associates worldwide. Walmart continues to be a leader in sustainability, corporate philanthropy and employment opportunity. It's all part of our unwavering commitment to creating opportunities and bringing value to customers and communities around the world.
From our humble beginnings as a small discount retailer in Rogers, Ark., Walmart has opened thousands of stores in the U.S. and expanded internationally. Through innovation, we're creating a seamless experience to let customers shop anytime and anywhere online, through mobile devices and in stores. We are creating opportunities and bringing value to customers and communities around the globe. Walmart operates over 11,200 stores under 55 banners in 27 countries and eCommerce websites in 10 countries. We employ approximately 2.2 million associates around the world — 1.5 million in the U.S. alone.
Around the world, we help families save money so they can live better. We use our size and scale to provide access to high-quality goods and fresh, nutritious food at everyday low prices—while creating opportunities for our associates and small and medium-sized global suppliers. Led by President & CEO Judith McKenna, Walmart International has more than 5,900 retail units, operating outside the United States with 55 banners in 26 countries with more than 700,000 associates serving more than 100 million customers every week.
Walmart store entrance
Overview of Walmart's 3rd quarter 2021 earnings release
The data below refers to the latest quarter unless specified otherwise
Revenue: $134.7 billion (up from $127.9 billion for the same quarter of the previous year)
Revenue increased by 5.2% over the last 12 months
Cost of sales: $100.4 billion (up from $95.9 billion for the same quarter of the previous year)
​Cost of sales increased by 4.6% over the last 12 months.
Margin gain for Walmart as the group's revenues increased at a faster rate than their cost of sales
Net income: $5.135 billion (up from $3.288 billion for the same quarter of the previous year)
​Diluted income per share: $1.80 (up from $1.15 for the same quarter of the previous year)
PE ratio of Walmart: 20.7
Diluted weighted number of shares outstanding: 2.849 billion (down from 2.861 billion for the same quarter of the previous year)
​Cash and cash equivalents per share: $5.02
Cash and cash equivalents makes up 3.3% of Walmart's market capital
Cash and cash equivalents makes up 5.7% of Walmart's total assets
Receivables, net: $5.770 billion
Receivables makes up 2.3% of Walmart's total assets
Inventories: $51.8 billion
​Inventories makes up 20.6% of Walmart's total assets
Walmart's inventories grew by 0.57% over the last 12 months
Stockholders equity in Walmart: $87.504 billion
Stockholders equity per share in Walmart: $30.71
So Walmart is trading at 4.9 times its stockholders equity per share which is just outside the expected range of between 2 and 4 times that most firms tend to trade at
For some perspective the average price to book value of firms in the S&P 500 is 3.9
Cash generated from operations for 9 months: $22.8 billion
Cash generated from operations per share for 9 months: $8.002
Walmart (WMT) management commentary on their 3rd quarter 2020 earnings
The company's net sales and operating results continue to be affected by the global health crisis. Increased demand for products across multiple categories led to strong top-line and gross margin results.
Total revenue was $134.7 billion, an increase of $6.7 billion, or 5.2%. Excluding currency2 , total revenue would have increased 6.1% to reach $135.8 billion.
Walmart U.S. comp sales increased 6.4% with strength across key categories, including general merchandise, health & wellness and food.
Walmart U.S. eCommerce sales grew 79% with strong results across all channels and contributed approximately 570 basis points to comp sales.
Sam's Club comp sales1 increased 11.1%. eCommerce sales grew 41%. Reduced tobacco sales negatively affected comp sales by approximately 420 basis points. New member sign-ups and renewal rates were strong, particularly Plus membership. Membership income increased 10.4%.
Walmart International net sales were $29.6 billion, an increase of 1.3%. Changes in currency rates negatively affected net sales by approximately $1.1 billion. Excluding currency, net sales would have been $30.6 billion, an increase of 5.0% led by Flipkart, Canada and Walmex. Strong growth in net sales at Flipkart was helped by a record number of monthly active customers.
Consolidated gross profit rate increased 50 basis points with positive contributions from each operating segment.
Consolidated operating expenses as a percentage of net sales decreased 18 basis points. Incremental expenses related to COVID-19 were approximately $0.6 billion, partially offset by a non-cash impairment charge in the third quarter of last year. Underlying productivity in stores and eCommerce remained strong.
Consolidated operating income was $5.8 billion, an increase of 22.5%. Adjusted operating income in constant currency increased 16.4% with strong contributions from each operating segment.
Adjusted EPS2 excludes the effects, net of tax, of an unrealized gain of $0.80 on equity investments and $0.34 for the loss on sale of Walmart Argentina. Operating cash flow year to date has been strong and increased approximately $8.3 billion versus last year to almost $23 billion.
"This was another strong quarter on the top and bottom line. Our associates continue to impress during this challenging year. They are working together to serve customers and communities in new, relevant ways and we're very proud of them. We think these new customer behaviors will largely persist and we're well positioned to serve customers with the value and experience they're looking for. " Doug McMillon President and CEO, Walmart ​
Walmart (NYSE:WMT) stock price history over the last 5 years
The image below obtained from Google, shows the stock price history of Walmart (NYSE:WMT) for the last 5 years. Its been a pretty solid run for Walmart shares over the last 5 years. 5 years ago the stock of Walmart was trading at $66.50 and its currently trading at $135.60 a stock. That's a healthy 103.9% return provided to Walmart stockholders over the last 5 years.
Walmart's stock is trading at a lot closer to its 52 week high of $136.13 than it is to its 52 week low of $102 which to us is a clear indication that the short term sentiment and momentum of Walmart's stock is overwhelmingly positive at this point in time
Walmart (WMT) stock price history over the last 5 years
Walmart (WMT) stock vs Target (TGT) stock performance over the last 5 years
The image below shows the stock price history of Walmart (WMT) stock vs Target (TGT) stock performance over the last 5 years. These two companies are two of the biggest general retailers in the world. The summary below shows the stock price performance of the two giant retailers over the last 5 years (ranked from best to worst)
Walmart (WMT): 153.4%
Target (TGT): 147.6%
The stock price returns provided by Walmart (WMT) and Target (TGT) over the last 5 years are similar with Walmart just outperforming the stock of Target over the last 5 years.
Recent coverage of Walmart (WMT)
The extract below covers the latest regarding Walmart as obtained from Fool.com
​It's hard to underestimate Walmart (NYSE:WMT). After all, it's the biggest company in the world by revenue -- and the biggest retailer.
The company is on track to generate more than $550 billion in revenue this year, and after a strong third-quarter earnings report, the retail stock is trading at an all-time high. Year to date, shares have racked up gains of 26%.
There's no doubting its market power as a company, but does that mean it's a good stock to buy? The retailer faces challenges on multiple fronts, most notably from Amazon, as the retail industry evolves from brick-and-mortar stores to e-commerce. Let's take a look at where the retail giant stands to determine how investors should proceed.
An ongoing evolutionIn 2015, Walmart CEO Doug McMillon announced that he was raising wages as one of several long-term investments in the company. The stock plunged on the news, but since then, Walmart shares have nearly tripled. Meanwhile, McMillon has shifted the company's strategy from a land-grab mentality focused on blanketing the country with new stores to essentially halting new store openings, instead using its resources to invest in e-commerce and store improvements like grocery pickup stations, inventory management, and better-looking, cleaner stores.
Latest Walmart (WMT) stock valuation
So what do we believe Walmart stock is worth after their latest earnings report and their fiscal guidance provided? Based on their very strong 2nd quarter 2021 earnings report our valuation model provides a target price (full value price) for Walmart stock at $145.10 a stock .
We therefore believe the stock of Walmart is slightly undervalued at its current price.
We usually recommend that long term fundamental or value investors look to enter a stock at least 10% below our target (full value) price which in this case is $145.10. A good entry point into Walmart would therefore be at $130.60 or below. We expect the stock of Walmart (WMT) to kick up from its current levels to levels closer to our target price (full value price) in coming weeks and months.
Next earnings release of Walmart (WMT)
It is expected that Walmart will release their 4th quarter 2021 earnings report towards the end of February 2021
​More About Walmart