Wal-Mart Stores Inc (NYSE: WMT) reported second quarter earnings and revenue beats and raised its full-year guidance on Thursday morning. Unfortunately for Walmart investors, you wouldn’t know the good news by looking at the company’s stock, which was initially down more than 3 percent following the report.
Walmart reported Q2 adjusted earnings per share of $1.08 on revenue of $123.36 billion. Both numbers topped consensus analyst estimates of $1.07 and $122.84 billion, respectively.
WMT also raised the low end of its full-year earnings guidance. The company is now calling for adjusted EPS between $4.30 and $4.40, up from a previous range of between $4.20 and $4.40.
[Read: The Best Ways to Value a Stock.]
Online sales, one of the most important metrics for Walmart’s future, were also impressive, up another 60 percent after a 63 percent jump last quarter.
But despite all the positive numbers, there were a handful of troubling signs for investors. U.S. comparable-store sales growth of 1.8 percent topped analyst expectations of 1.7 percent growth, but slumping margins suggest the beat was partially driven by lower prices. Overall gross margins declined 0.11 percent to 25 percent.
International sales dipped 1 percent to $28.3 billion.
But the most likely reason the stock is trading lower on Thursday is that, while slightly above Wall Street estimates, none of Walmart’s numbers were exceptional. A 2 cent earnings beat and a 0.4 percent revenue beat may not be impressive enough to trigger buying for a stock that’s already up more than 30 percent since the beginning of 2016.
“We view the Q2 results reported by WMT as essentially consistent with the high-end of management’s guidance, but modestly short of the more bullish market expectations following the recent rally,” Oppenheimer analyst Rupesh Parikh says.
Gordon Haskett analyst Chuck Grom says Walmart “needed to be a little bit better today to drive the stock higher.”
[See: 7 of the Best Stocks to Buy for 2017.]
Walmart may have once again demonstrated in the second quarter that it is holding its own in a slumping U.S. retail sector. But investors seem to be expecting a bit more than the 1 to 2 percent revenue and earnings growth the company has delivered in the first two quarters of 2017.
More from U.S. News
The 25 Best Blue-Chip Stocks to Buy for 2017
7 of the Best ETFs to Own in 2017
7 Dividend Stocks to Buy That Pay More Each Year
Investors Uninspired by Wal-Mart’s (WMT) Modest Earnings Beat originally appeared on usnews.com
