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It's Big Retail's Turn to Move the Stock Market

By Dan Caplinger - May 18, 2021 at 11:29AM

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Find out how the latest earnings affected investor sentiment.

Tuesday morning brought a mixed picture to Wall Street, as major market benchmarks were mixed in early trading. Growth stocks rebounded somewhat from their Monday swoon, but other stock indexes stayed relatively close to the unchanged mark. As of 11:15 a.m. EDT, the Dow Jones Industrial Average (^DJI 1.27%) was down 63 points to 34,265. The S&P 500 (^GSPC 1.73%), however, had risen 2 points to 4,165, and the Nasdaq Composite (^IXIC 2.09%) had seen significant gains of 98 points to 13,477.

Earnings season continued to move forward, and plenty of investors were watching closely to see how some of the biggest players in the retail world have fared to start 2021. Walmart (WMT 1.85%) and Home Depot (HD 1.35%) had generally strong results, but their share prices didn't necessarily reflect the rebound that their businesses have seen from the extremely difficult conditions from a year ago.

Three smiling shoppers at a hat store, with one trying on a hat.

Image source: Getty Images.

Walmart enjoys the big-box life

Shares of Walmart were up more than 2% on Tuesday morning. The big-box giant had solid results that gave investors more confidence in its ability to stand up to disruptive competition in areas like e-commerce.

Walmart's first-quarter numbers featured signs of growth. Revenue climbed 2.7% from year-ago levels, even though the company divested some of its international operations that had about a three percentage point negative impact on growth. Comparable sales in the U.S. were up 6%, with an impressive 27% rise in operating income. E-commerce sales in the U.S. were up 37% year over year and have more than doubled since early 2019. Net income fell 32% on a reported basis, but adjusted earnings of $1.69 per share were better than most investors had expected to see.

Walmart is excited about what the rest of the year will bring. CEO Doug McMillon noted his belief that pent-up demand is already starting to work its way through the economy and should bolster results throughout the rest of the year. Even with uncertainty about whether future government stimulus will happen, the Walmart CEO pointed to higher market share in the grocery segment as one cause for boosting the retailer's outlook for the second quarter and the full year.

It wasn't long ago that investors doubted Walmart could fight back against e-commerce competition. So far, though, the big-box giant has answered the call, and that bodes well for the stock's future.

Heading home

Home Depot's shareholders weren't as fortunate, as the company's stock fell almost 1% Tuesday morning. Yet the home improvement retailer's results showed even stronger signs of growth.

Home Depot's revenue soared 33% in the first quarter of 2021, with comparable sales jumping 31%. That helped push the company's bottom line up sharply, with earnings per share skyrocketing 86% year over year to $3.86.

CEO Craig Menear attributed the strength to a couple of factors. First, consumers continue to put a lot of effort and money into home improvement projects. In addition, strategic investments that Home Depot has made to bolster its e-commerce channel and woo professional contractors have worked out extremely well.

Home Depot's stock has gained more than 25% just since early March, making it a positive outlier in what's been a tough market environment. With its products remaining in high demand, Home Depot has every chance to stay successful well into the future.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Home Depot. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Wal-Mart Stores, Inc. Stock Quote
Wal-Mart Stores, Inc.
WMT
$132.22 (1.85%) $2.40
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$33,761.05 (1.27%) $424.38
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
^GSPC
$4,280.15 (1.73%) $72.88
The Home Depot, Inc. Stock Quote
The Home Depot, Inc.
HD
$314.89 (1.35%) $4.20
NASDAQ Composite Index (Price Return) Stock Quote
NASDAQ Composite Index (Price Return)
^IXIC
$13,047.19 (2.09%) $267.27

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

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