Earnings Preview: Wal-Mart

Wal-Mart Stores Inc. (WMT), one of the leading retail giant worldwide, is scheduled to report its third-quarter 2011 financial results on Tuesday, November 16, 2010. The current Zacks Consensus Estimate for the quarter is 90 cents a share.

Second –Quarter Synopsis

Wal-Mart Stores Inc. reported better-than-expected second-quarter 2011 results and raised its EPS outlook for the rest of fiscal 2011. The retailing giant reported adjusted quarterly earnings of $0.97 per share, beating the Zacks Consensus Estimate of $0.90 per share.

Management raised its full-year 2011 EPS guidance to a range of $3.95 to $4.05 per share. For the third quarter, the company expects earnings in the range of $0.87 to $0.91 per share.

Wal-Mart posted net sales growth of 2.8% to $103.7 billion from $100.8 billion in the year-ago quarter. The expansion was primarily driven by a robust 11.0% expansion in the International segment, which benefited from favorable currency translations, coupled with a 2.2% growth in the Sam’s Club segment. However, sales at the Wal-Mart’s U.S. segment were flat year-over-year.

Second Quarter 2010 Consensus

Analysts surveyed by Zacks expect Wal-Mart to post third-quarter 2010 earnings of 90 cents a share, which is within the company’s guidance range. The current Zacks Consensus Estimate represents a year-over-year growth of 7.1%. The estimates in the current Zacks Consensus for the quarter range remain flat at 90 cents.

The current Zacks Consensus Estimate has remained stagnant over the last 30 days; with 3 out of 26 analysts covering the stock revising their estimates upward. In the last 7 days, one analysts has raised the forecast, while the others have kept their estimates unaltered, leaving the consensus unchanged.

Earnings Surprise History

With respect to earnings surprises, Wal-Mart has reported well above the Zacks Consensus Estimate over the last four quarters with an average of 3.49%. This suggests that Wal-Mart has outperformed the Zacks Consensus Estimate by an average of 3.49% in the last four quarters.

Our View

Wal-Mart continues to benefit from its strong international presence which has boosted strong growth. We expect the same to continue in the coming quarters, as well.

To further strengthen its international presence, the company has announced its intention to acquire South African based consumer goods distributor Massmart Holdings Ltd. Moreover, the company’s strong balance sheet supports its growth. However, the intense competition across its various segments concerns us.

Consequently, we have a Neutral rating on the stock. However, Wal-Mart holds a Zacks #3 Rank, which translates into a short-term Hold recommendation.

Wal-Mart Stores, which competes with Costco Wholesale Corporation (COST) and Target Corporation (TGT), currently has its retail operation in 14 countries and Puerto Rico.

WAL-MART STORES (WMT): Free Stock Analysis Report

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