WalMart shares surges 7% after earnings report 📈

WalMart (WMT.US) shares are gaining nearly 15% after the company soundly beat earnings estimates and raised forecasts. Management told investors of a $20 billion share repurchase program:

Earnings per share (EPS): $1.5 vs. $1.32 forecast (FactSet)

Revenue: $152.8 billion (8.7% increase y/y) vs. $147.7 billion (FactSet)

Inventory: up 25% y/y, down 12.7% k/k

WalMart, which offers competitive prices across the United States, is attracting consumers looking to save money at a time of rampant inflation. The company's results are always widely reported by Wall Street and provide information about the financial health of American households:

• According to WalMart, customers are showing great resilience in the still uncertain macroeconomic environment, which, among other things, has prompted the company to buy back its own shares. Same-store sales rose 8.2% from a year ago, beating expectations of 4.3%. WalMart also shared optimistic forecasts with the market;
• Management expects net sales to increase by about 5.5% and operating profit to continue to improve.  According to analysts, the chances of 'proving' the forecasts by are high, especially given the statistically record Christmas quarter of the year;
• According to WalMart executives, higher-income shoppers have also begun to shop at the company's stores, and the growing popularity among thrift-seeking shoppers has helped the company increase market share and drive sales . According to analysts at RBC Capital Markets, WalMart has become a kind of 'safe territory' for consumers. UBS analysts wrote in a note that WMT is well positioned to benefit from an uncertain environment;
• In July, the company lowered its profit forecasts, painting a grim picture of the condition of consumers with what caused declines in the broad market. By August, investors had become more optimistic, after the company released an expectations-beating second-quarter report and raised full-year forecasts;
• Since the end of Q1, the company has been struggling with high inventories, which are weighing on margins and profits. Management forecasts that it will take several quarters to restore balance so any step in a better direction will be received positively by investors. According to analysts at UBS and RBC, gross margins will be dragged down 0.75% by inventories.  

WalMart (WMT.US) shares, M30 interval. Source: xStation5