Coffee With Greta: Inflation Squeezes Walmart


DJIA Futures: -112 (-0.4%)

SPX Futures: -14 (-0.4%)

NASDAQ Futures: -60 (-0.5%)

Good morning friends!

Futures are slipping after a profit warning from Walmart and as Q2 earnings season ramps up.

Let’s get right to it!

Walmart Slashes Profit Guidance

Walmart (WMT) shares are tumbling 8.6% ahead of the open after the big box retailer slashed its Q2 profit guidance. 

The company announced the updated forecast in a press release after the close on Monday.

Walmart now expects profits to fall 8% to 9% in Q2 vs its previous forecast for slight growth. 

Full-year earnings per share are also expected to drop 11% to 13% vs previous guidance for a 1% decline. 

Walmart says high inflation is causing shoppers to spend more on necessities like food and less on items like clothing and electronics. 

The company’s profit margins on food are smaller than margins on discretionary items. 

The CEO said, “The increasing levels of food and fuel inflation are affecting how customers spend, and while we’ve made good progress clearing hardline categories, apparel in Walmart U.S. is requiring more markdown dollars.”

Walmart forecast same-store sales in the U.S. will rise 6% in Q2 vs the previous forecast for growth between 4% and 5%. 

The news is dragging down other retail stocks in premarket trade with Target (TGT) dropping 5.1% and Amazon (AMZN) falling 4.3%.

GM Slips On Q2 Profit Miss

General Motors (GM) shares are down 1.8% in premarket trade after missing Q2 profit expectations. 

The automaker reported adjusted earnings of $1.14 per share on $35.76 billion in revenue. 

That missed analysts’ expectations for adjusted EPS of $1.20 but topped estimates for $33.58 billion in revenue. 

The profit miss came as GM was unable to ship nearly 100,000 vehicles during the quarter due to parts shortages. 

But the automaker maintained its previous full-year guidance and said it’s confident it will be able to ramp up production.

CEO Mary Barra also said the company has “binding agreements” for all of the battery-related raw materials needed for its electric vehicle plans.

GE Crushes Q2 Expectations

General Electric (GE) shares are jumping 4.1% ahead of the open after crushing Q2 expectations.

The company reported adjusted earnings of $0.78 per share on $17.9 billion in revenue. 

That solidly beat analysts’ expectations for adjusted EPS of $0.37 on $17.8 billion in revenue. 

GE had $162 million in free cash flow during the quarter.

The beat came amid a strong bounce back in air travel which boosted GE’s engine business. 

That unit reported a 27% annual jump in revenue.

The company said full-year earnings are expected to be in the bottom end of their previously forecast range, between $2.80 to $3.50 per share. 

Coca-Cola Tops Q2 Expectations

Coca-Cola (KO) shares are up 1% in premarket trade after reporting better-than-expected Q2 results.

The beverage maker reported adjusted earnings of $0.70 on $11.3 billion in revenue. 

That topped analysts’ estimates for adjusted EPS of $0.67 on $10.56 billion in revenue.

Revenue was up 12% year-over-year thanks to higher pricing and an increase in sales volumes. 

Coca-Cola forecast organic revenue growth of 12% to 13% in 2022, up from its previous forecast for 7% to 8% growth. 

But the company said commodity price inflation is expected to have a high-single digit impact on sales growth vs previous expectations for a mid-single digit impact.

McDonald’s Reports Mixed Q2 Results

McDonald’s (MCD) shares are up 0.6% ahead of the open after mixed Q2 results. 

The fast food chain reported adjusted earnings of $2.55 per share on $5.72 billion in revenue. 

That beat analysts’ expectations for adjusted EPS of $2.47 but was short of estimates for $5.81 billion in revenue.

The revenue miss was partly due to the closure of McDonald’s restaurants in Russia and Ukraine.

Same-store sales in the U.S. jumped 3.7% vs 2.8% expected.

McDonald’s said higher prices and value items fueled that sales growth.

3M Tops Q2 Expectations, Announces Spin Off of Healthcare Business

3M (MMM) shares are up 3.9% in premarket trade after beating Q2 expectations and announcing it will spin off its healthcare business.

The company reported adjusted earnings of $2.48 per share on $8.7 billion in revenue. 

That was better than analysts’ expectations for adjusted EPS of $2.42 on $8.58 billion in revenue. 

3M said it will now spin off its health care business into a separate publicly traded company. 

That business will focus on wound and oral care, healthcare IT, and biopharma filtration. 

It includes products like its bandages, skin adhesives, oral aligners, air purifiers, and glasses lenses.

The spin off is expected to be complete by the end of the year and 3M will maintain a 19.9% stake in the new company. 

UPS Slips Despite Q2 Beat

United Parcel Service (UPS) shares are down 2.4% ahead of the open despite beating Q2 expectations. 

The delivery service reported earnings of $3.25 per share on $24.8 billion in revenue. 

That topped analysts’ expectations for EPS of $3.15 on $24.6 billion in revenue. 

UPS maintained its full-year forecast for revenue of $102 billion and operating profit of $13.9 billion. 

Fed Meeting Kick Off

The Federal Open Market Committee’s July meeting kicks off today. 

The market is still betting the bank will approve a 75 basis point rate hike.

CME Group’s FedWatch Tool shows 75.1% of traders leaning toward that smaller movee while 24.9% are still expecting a 100 basis point hike. 

Oil Prices Rise on Tight Supply Concerns

Oil prices are rising for the second day in a row as supply concerns take over. 

West Texas Intermediate crude futures are up 1.5% to over $98 bbl while Brent crude futures are rising 1.5% to nearly $107 bbl.

Russia said Monday that natural gas sent through the Nord Stream 1 pipeline to Germany would drop to just 20% of capacity. 

That is expected to increase demand for diesel as Europe will be unable to refill its natural gas storages ahead of winter. 

Gas Prices Tumble

U.S. gas prices fell for the 41st day in a row today.

AAA shows the national average for regular gas fell nearly 3 cents overnight to $4.327/gal.

The national average for diesel also fell nearly 3 cents overnight to $5.386/gal.

Leave a Comment: