Walmart on a rampage after earnings
Today Walmart presented the 3rd quarter earnings of 2017. The figures look really good which results in a 10% gain today so far. How can a company like Walmart gain 10% in one day?
When we look at the recent years of Walmart history you can see that the company peaked in 2015. After that it the price of the stock only went down because investors didn’t believe in the stock anymore. The growth slowed and the stock price plummeted. At the end of 2015 Walmart reached a low. By then they had a plan to turn the company around. They wanted to focus on creating online business and they raised employee payments to make sure that it was possible to attract people who are better suited to deliver quality in the stores.
The result is that from 2016 onwards the stock kept rising. The last quarters where already very good and they all outperformed analyst estimates. This quarter is blowing all previous quarters away and the result is quite clear. Investors see the light again in the company and the stock reached an all time high again, higher than the high of 2015.
The Walmart 3rd quarter results
The next question is simple. What exactly caused the stock surge? What was so good in the 3rd quarter result? Well, to put some important figures in perspective:
- Walmart US compo sales increased 2,7%, comp traffic increased 1,5%
- Total revenue increased 4,2%, it increased 3,8% excluding currency effects
- Net sales of e-commerce increased 50%
- Net sales of Walmart international increased 4,1%, excluding currency effects it increased 2,5%
Those figures look good. Very good even. And the result is quite clear. A 10% stock surge in a single day. I am investing for 2 years now, but I haven’t seen this in one of my stocks before. The main reasons why investors are happy is the increase in the US stores and the increase in e-commerce. Especially the last one is important because it shows that Walmart can grow very fast even with Amazon as a direct competitor with the Whole Foods purchase of Amazon. Amazon only grew online sales with roughly 29% so the growth of Walmart is really good.
The question is what will happen with Walmart in the future. Will this be a temporary surge and will it reset or is this a continuation of a strong uptrend. The general expectation is that e-commerce still has a lot of growth ahead of it. In other words, the stock still has a lot of room to grow. Especially because e-commerce is the future of retail and it is quite clear that Walmart is performing very strong in e-commerce.
Still, I am wondering if the stock is not getting into overvalued territory. It is hard to tell and only time will tell. On the other hand, I am very curious what the next dividend growth rate will be. With good figures one would expect increasing growth rates. Time will tell.
It’s quite clear that I’m very happy with the performance of this stock so far. It’s the best performing stock I have in my portfolio with a 70% increase so far with a 3,5% YoC. If there is only one thing I regret, then it’s not buying more when I had the chance. But looking back is of no use of course.