Walmart (WMT – Free report) quarterly report showed it was able to overcome supply chain challenges and keep its shelves well stocked.
Walmart had to spend more to keep shelves stocked and stores staffed, with supply chain costs running $400 million more than it had anticipated as Omicron’s push increased dramatically its Covid-specific paid leave costs. As was the case in the prior period, Walmart benefited from +26% more inventory in the quarter under review.
The market appreciated Walmart’s ability to navigate this difficult operating environment against an otherwise robust consumer spending backdrop, as the January retail sales report showed. It will be interesting to see if retail operators like Home Depot (HD), Lowe’s (LOW), Macy’s (M) and others reporting results this week will receive the same treatment.
Turning to the retail sector’s fourth quarter 2021 earnings season dashboard, we now have results for 20 of the 34 retailers in the S&P 500 Index. are up +53.6% over the same period last year, with revenue up +7.5%, with 80% beating EPS estimates and an equal proportion beating revenue estimates. The comparison charts below put the fourth quarter beat percentages for these retailers in historical context.
Image source: Zacks Investment Research
In terms of earnings and revenue growth rates, Amazon’s hit numbers play a significant role in the industry’s strong year-over-year growth rate (Amazon is part of Zacks Retail and not from the Zacks Technology sector). The two comparison charts below show fourth quarter earnings and revenue growth versus other recent periods, both with Amazon’s results (left chart) and without Amazon’s numbers ( right graph).
Image source: Zacks Investment Research
This week’s statement file
We have over 700 companies on deck to report their results this week, including 53 members of the S&P 500. Notable companies reporting this week, besides the aforementioned retailers, are Live Nation Entertainment (LYV), Bookings Holdings (BKNG), Medtronic (MDT) and others.
Fourth Quarter Earnings Season Dashboard
Including all results published up to Friday 18 Februaryand, we now have fourth quarter results for 420 members of the S&P 500, or 84% of the total number of index members. The total profit (or aggregate net profit) of these 420 companies is up +30.6% compared to the same period last year on revenues down +15.6%, with 77.4% exceeding EPS estimates and 78.3% revenue estimates.
The two sets of comparison charts below put the fourth quarter results of these 420 index members in historical context, which should give us some idea of how the fourth quarter earnings season is going at this stage compared to other recent periods.
The first set of graphs compares earnings and revenue growth rates for these 420 index members.
Image source: Zacks Investment Research
The second set of charts compares the proportion of these 420 index members beating EPS and earnings estimates.
Image source: Zacks Investment Research
As you can see in the comparison above, the fourth quarter numbers not only represent a deceleration in growth from the pace of the first three quarters of the year, but also in terms of percentage beats, particularly the EPS beat percentages.
In fact, the fourth quarter revenue beats exceed the fourth quarter EPS beat percentage. The most logical explanation for this anomaly is the impact of ongoing inflationary trends and other logistical bottlenecks which appear to have been greater headwinds than analysts had anticipated. Revenues remain strong, reflecting continued strong demand, but margins have been under pressure due to higher than expected cost increases.
Expectations for the fourth quarter and beyond
Looking at the quarter as a whole, combining actual earnings reports with future company estimates, the S&P 500’s fourth quarter total earnings are expected to rise +31.7% from the same quarter. period last year. +15.2% increase in revenue.
The chart below charts earnings and revenue growth on a quarterly basis, with expectations for the fourth quarter of 2021 contrasting with the actual growth achieved in the previous four quarters and the estimates for the following three.
Image source: Zacks Investment Research
Please note that although the year-over-year revenue growth rate has decreased, the overall dollar value of revenue remains very high. In fact, total aggregate earnings for the fourth quarter of 2021 are on track to hit a new all-time quarterly high, as seen in the chart below.
Image source: Zacks Investment Research
For the current period, total earnings for the S&P 500 are expected to increase by +4.4% compared to the same period last year on revenues up by +8.4%. The chart below shows the revision trend for the current period.
Image source: Zacks Investment Research
The graph below shows the comparable picture on an annual basis.
Image source: Zacks Investment Research
For a detailed look at the overall earnings picture, including expectations for the periods ahead, please see our Weekly Earnings Trends Report >>>> Record Fourth Quarter Earnings Despite Economic Headwinds
