Walmart Q2 Results Fall Just Short Of Its Most Bullish Expectations

Wal-Mart Stores Inc (NYSE: WMT) reported top- and bottom-line beats in its earnings report Thursday morning while U.S. comps grew for the twelfth consecutive quarter. Yet the stock lost around 2 percent — a move many investors don't fully understand.

Oppenheimer's Rupesh Parikh explained why Walmart's stock dipped 2 percent early Thursday morning in a research report. Simply put, the company's report was just in line with management's own guidance but short of the "more bullish market expectations."

Specifically, a 1.8 percent U.S. comps growth at the core-Walmart store rose 1.8 percent, in line with management guidance of 1.5–2 percent. Also, Walmart's earnings per share came in just 1 cent better than expected at $1.08.

There were several encouraging aspects of the earnings report beyond the headline numbers, Parikh continued. For instance, U.S. grocery was a "bright spot" as the food category saw its strongest quarterly comp performance in five years. Also, total two-year US comp trends improved by 0.9 percentage points to 3.1 percent from the prior quarter.

Perhaps more important to many investors, online sales remained strong and may signal that eCommerce is "beginning to click" for Walmart.

But at the end of the day, Walmart's earnings were positive, just not good enough to help the stock — a trend clearly playing out within the retail sector.

Parikh maintains an Outperform rating on Walmart's stock with an unchanged $90 price target.

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