When Walmart (WMT) releases its financial results for the quarter ending October 2023, Wall Street expects a year-over-year profit increase on higher sales. While this widely held consensus outlook is important in gauging the company’s earnings picture, this powerful factor in influencing near-term stock prices is dependent on how actual results compare to these expectations. It’s about being compared.
If these key numbers are better than expected, the company’s earnings report, scheduled to be released on November 16, 2023, could contribute to a rise in stock prices. Conversely, if you miss it, the stock price may fall.
The sustainability of immediate price fluctuations and future profit forecasts are largely determined by management discussing the business situation at financial results conferences, but it is important to gain handicapping insight into the probability of unexpectedly positive EPS. It’s worth getting.
Zacks Consensus Estimate
The world’s largest retailer is expected to post quarterly earnings of $1.51 per share in its upcoming report, representing a year-over-year change of +0.7%.
Sales are expected to increase 4.2% year on year to $159.18 billion.
Estimate revision trends
Consensus EPS estimates for the quarter have increased by 0.45% over the past 30 days to current levels. This essentially reflects how our covered analysts collectively reassessed their initial forecasts over this period.
Investors should note that changes in aggregate values ​​do not necessarily reflect the direction of forecast revisions by individual analysts.
Whisper of profits
Revisions to a company’s earnings forecasts prior to the announcement of financial results provide clues to the business situation during the period in which the financial results are announced. This insight is at the core of our proprietary surprise prediction model, Zacks Earnings ESP (Expected Surprise Prediction).
The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter. The “Most Accurate Estimate” is a newer version of his EPS estimate from the Zacks Consensus. The idea here is that by revising their forecasts right before an earnings announcement, analysts can get more up-to-date information, and that information is better than what they and other analysts contributing to the consensus had previously predicted. This means that it can also be accurate.
Therefore, a positive or negative earnings ESP measurement would theoretically indicate that actual earnings are likely to diverge from consensus estimates. However, the predictive power of the model is significant only when the ESP reading is positive.
A positive Earnings ESP is a strong predictor of earnings upside, especially when combined with a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold). Our research shows that stocks with this combination deliver a positive surprise nearly 70% of the time, and a solid Zacks Rank actually increases the predictive power of its Earnings ESP.
Note that a negative earnings ESP measurement does not indicate a lack of earnings. Our research shows that stocks with a negative Earnings ESP measure or a Zacks Rank of 4 (Sell) or 5 (Strong Sell) can predict earnings expectations with some degree of confidence. has been shown to be difficult.
What happened to Walmart’s numbers?
In Walmart’s case, the Most Accurate Estimate is higher than the Zacks Consensus Estimate, suggesting analysts have recently become more bullish on the company’s earnings outlook. This resulted in an earnings ESP of +0.63%.
Meanwhile, the stock currently has a Zacks Rank of #2.
Therefore, this combination indicates that Walmart will most likely beat consensus EPS estimates.
Are there any clues in the history of this amazing achievement?
When calculating future earnings estimates, analysts often consider how well a company has been able to match consensus expectations in the past. So it’s worth taking a look at its surprising history to gauge its impact on future numbers.
For the last reported quarter, Walmart was expected to post earnings of $1.69 per share when it actually produced earnings of $1.84, delivering a surprise of +8.88%.
The company has surpassed consensus EPS estimates four times over the last four quarters.
conclusion
High or low performance may not be the only basis for a stock price to rise or fall. Many stocks end up stalling despite increased profits due to other factors that disappoint investors. Similarly, unexpected catalysts cause many stocks to rise despite lower earnings.
That said, you increase your odds of success by betting on stocks that are expected to beat earnings expectations. This is why it’s worth checking the company’s Earnings ESP and Zacks Rank ahead of its quarterly release. Be sure to utilize our Earnings ESP filter to find the best stocks to buy or sell before the report is released.
Walmart appears to be a strong candidate with more upside. However, investors should also pay attention to other factors before making a bet on this stock or moving away from it ahead of the earnings release.
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