Walmart, Home Depot Earnings: HD beats the street, but WMT misses big

Update: Walmart just missed on earnings per share (EPS) but beat on revenue. The key metric is that it issued a very bearish outlook as WMT stock plunges 6% in the premarket. EPS arrived at $1.30 versus $1.48 consensus, while revenue was marked at $141 billion versus a $139 billion estimate. Guidance was cut from low single-digit growth to a likely flat level or small increase. “Bottom line results were unexpected and reflect the unusual environment. US inflation levels, particularly in food and fuel, created more pressure on margin mix and operating costs than we expected,” said CEO Doug McMillon.

A number of notable events will give us further clues as to the strength of the US consumer on Tuesday. We have retail sales data at 8:30 AM EST. Then we have notable premarket earnings from retail titans Walmart (WMT) and Home Depot (HD). Added to that, we get numbers from Chinese giant JD.com. 

Walmart Earnings Preview

Walmart is expected to post earnings per share of $1.48 on revenue of $138.1 billion. These both represent declines from a year ago as analysts pencil in a slowdown in reopening spending. Even still these figures may be tough to compete with as the reopening and stimulus boom was a strong kicker to earnings. As ever markets are forward-looking on pricing, so it is the outlook that will be the most important factor. We will want to see how inflation is impacting consumer spending and margins. Previously, Walmart had said it expects sales to grow 3% in 2023, so this guidance will be the key metric.

With a possible US recession on the way, Walmart would be chosen to outperform other retailers. In recessions and especially inflationary times, low cost retailers outperform the high street or high-end retail. 

Home Depot Earnings

Home Depot just posted strong earnings and guidance for the rest of 2022. Earnings per share came in at $4.09 versus the $3.67 estimate. Revenue also beat at $38.9 billion versus $36.7 billion consensus. More importantly, Home Depot said it expects sales growth circa 10% for 2022 and EPS growth in mid-single digits in percentage terms. HD stock has naturally pushed higher in Tuesday's premarket and is up 5% at the time of writing. 

Walmart Stock Forecast

Walmart stock has retreated to its $135 to $150 range despite a brief breakout earlier this year. $152 is key resistance, and below we feel the risk-reward is to the downside. $135 is then a key support. Breaking here will bring WMT to target a move to $111. This zone we have marked for uncertainty and volatility. WMT really struggled for direction here before finally breaking out.

WMT stock chart, daily

Home Depot Stock Forecast

$340 caps this one in our view despite the recent strong results. The market faces macro headwinds, and these are likely to trump individual earnings for now. We expect a rally circa 10%, and with HD stock posting solid earnings and outlook that should lead HD to test this $340 level. It may prove difficult to break however. 

Home Depot (HD) stock chart, daily