Why did Walmart stock crash after a positive earnings report?

On November 15, Walmart (NYSE: WMT) experienced an impressive surge to a new all-time high, bringing its year-to-date gains to more than 18% as of that date.

The stock’s upward trajectory in recent months was propelled in part by Walmart’s Q2 2024 fiscal report, where it elevated its full-year forecast, leveraging its renowned low-price image to attract grocery shoppers and boost online spending. 

However, the release of the Q3 2024 financial report on November 16, surpassing estimates but triggering a significant stock decline, has added a twist to Walmart’s financial narrative.

Walmart’s Q3 earnings

First of all, let’s take a look at how Walmart’s financially performed in the third quarter.

Notably, the company reported adjusted earnings per share (EPS) of $1.53, just above the consensus estimate of $1.52. Net income rose to $453 million in the three-month period, compared to a $1.8 billion loss reported in the year-earlier quarter.

Revenue came in at $160.8 billion, topping the consensus projection of $159.7 billion and up from the $152.8 billion generated in the fiscal Q3 2023. The revenue increase was driven by growth in Walmart’s grocery business, which capitalized on high inflation and digital sales. 

Comparable sales for Walmart US and Sam’s Club grew 4.9% and 3.8% year-over-year, respectively. 

So what caused WMT’s stock price drop?

In spite of beating earnings and revenue estimates, shares of Walmart plunged 6.8% on Thursday after the company issued a softer-than-expected guidance for the full fiscal year.

The retail giant expects full-year adjusted EPS to be in the range of $6.40 to $6.48, higher than the previous guidance but below the consensus estimates of $6.48. 

The company anticipates consolidated net sales to grow 5% to 5.5%, also higher than the previous forecast range.  

Today’s downswing comes just a day after WMT shares touched an all-time high of nearly $170. 

Despite a stock price drop, former hedge fund manager and TV personality Jim Cramer was somewhat impressed by Walmart’s earnings report.

“WMT not that bad!” he tweeted. 

His post on X attracted a flood of sarcastic comments, such as “Sell,” and “shorting it.” 

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