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Dow Jones News: Apple Warns on Sales; Walmart Posts Mixed Results

By Timothy Green - Feb 18, 2020 at 10:47AM

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The coronavirus outbreak will take a toll on Apple's results. Elsewhere, Walmart reported a mixed quarter.

The Dow Jones Industrial Average (^DJI 2.68%) took a dive on Tuesday after Apple (AAPL 2.45%) said that it would fall short of its recently issued revenue guidance. The coronavirus outbreak in China has led to iPhone supply constraints, and demand for Apple products in the country has taken a hit as well. As of 10:10 a.m. EST, the Dow was down 0.33%.

While Apple stock slumped, shares of Walmart (WMT 0.08%) managed to move higher after the retailer reported its fourth-quarter results. The headline numbers were mixed, but there was apparently enough good news to keep the stock afloat.

Apple will fall short of guidance

Another year, another China-related warning from Apple. Previously, the iPhone maker was forced to slash its guidance at the beginning of 2019, partly due to weak demand in China. Now, a little more than a year later, the ongoing coronavirus outbreak in China has once again led to a guidance cut.

Six iPhone 11 handsets in various colors

Image source: Apple.

In a statement issued on Monday, Apple said that it now expects to fall short of the revenue guidance it provided on Jan. 28. The company had given a revenue guidance range of $63 billion to $67 billion for the fiscal second quarter, with the $4 billion gap accounting for uncertainty created by the coronavirus outbreak in China. It turns out that the Mac maker was overly optimistic.

Apple is experiencing a slower return to normal conditions in China than expected. The ramping of production at manufacturing facilities run by partners has happened more slowly than anticipated, which will lead to a temporarily constrained worldwide supply of iPhones. This situation will hurt Apple's revenue in all regions.

On top of the iPhone shortage, demand in China has plunged. All of Apple's stores and many of its partner stores in China have been closed during the crisis, and stores that remained opened suffered from "very low" customer traffic. Outside of China, Apple said that demand remains in line with its expectations.

Apple didn't issue a new revenue guidance range, but the tech giant will provide more information when it reports its quarterly results in April. The stock was down about 2.3% Tuesday morning.

Walmart shares climb despite mixed results

Megaretailer Walmart failed to live up to expectations on Tuesday, reporting mixed fourth-quarter results and comparable-sales growth that was weaker than expected. The company's earnings guidance was also a bit weak, although the e-commerce business continues to grow at a quick pace. Shares of Walmart were up 0.6% as investors digested the news.

Walmart reported fourth-quarter revenue of $141.7 billion, up 2.1% year over year and in line with analyst expectations. Non-GAAP (adjusted) earnings per share of $1.38 were down slightly from the prior-year period, missing estimates by $0.06.

U.S. comparable sales were up 1.9% in the quarter, less than the 2.4% growth analysts were expecting. This was driven by transaction growth of 1% and ticket growth of 0.9%. U.S. e-commerce sales soared 35%, driven by both online grocery and

For fiscal 2021, Walmart expects sales growth of 3% in constant currency, U.S. comparable-sales growth of at least 2.5% excluding fuel, U.S. e-commerce sales growth of around 30%, and adjusted earnings per share between $5.00 and $5.15. That earnings guidance was a bit short of the $5.22 analysts were expecting.

Walmart stock has soared around 70% over the past three years, pushing the price-to-earnings ratio well above 20. With sales growth slowing, that premium valuation may be in for an adjustment.

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Stocks Mentioned

Apple Inc. Stock Quote
Apple Inc.
$141.66 (2.45%) $3.39
Wal-Mart Stores, Inc. Stock Quote
Wal-Mart Stores, Inc.
$123.72 (0.08%) $0.10
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
$31,500.68 (2.68%) $823.32

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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