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Wal-Mart Stores, Inc. (NYSE:WMT) reported its F2Q 2014 result yesterday. Wal-Mart reported declining traffic, like Macy's (NYSE:M) earlier this week. Based on these preliminary financial results for the quarter ended July 31, 2013, we analyze Wal-Mart relative to its peers (scroll to end of post for the peer set we used).

The table below shows the preliminary results along with the recent trend for revenues, net income and returns.

Quarterly (USD million) 2013-07-31 2013-04-30 2013-01-31 2012-10-31 2012-07-31
Revenues 116,945.0 114,187.0 127,919.0 113,929.0 114,296.0
Revenue Growth % 2.4 (10.7) 12.3 (0.3) 1.1
Net Income 4,069.0 3,784.0 5,606.0 3,635.0 4,016.0
Net Income Growth % 7.5 (32.5) 54.2 (9.5) 7.3
Net Margin % 3.5 3.3 4.4 3.2 3.5
ROE % (Annualized) 22.9 20.7 29.9 20.2 23.1
ROA % (Annualized) 8.1 7.5 11.0 7.2 8.2

Market Expectations

Wal-Mart Stores' current Price/Book of 3.4 is about median in its peer group. The company's operating performance is higher than the median of its chosen peers (ROE of 24.1% compared with the peer median ROE of 18.9%) but the market does not seem to expect higher growth relative to peers (PE of 14.5 compared with peer median of 17.3) but simply to maintain its relatively high rates of return.

The company's asset efficiency (asset turns of 2.4x) and net profit margins of 3.6% are both median for its peer group. WMT's net margin is similar to its five-year average net margin of 3.5%.

Growth and Investment Strategy

The company's revenues have grown at about the same rate as its peers (4.7% vs. 5.6% respectively for the past three years). Similarly, the stock price implies median long-term growth as its PE ratio is around the peer median of 14.5. The historical performance and long-term growth expectations for the company are largely in sync.

Wal-Mart's annualized rate of change in capital of 5.2% over the past three years is higher than its peer median of 3.0%. This investment has generated an above-peer median return on capital of 13.2% averaged over the same three years. Evidently, the relatively high capital investment was successful given the relatively strong growth in its returns.

Net Margin Trend Charts for Wal-Mart

Quarterly Net Margin Trend

WMT Peers used in Analysis, Inc. (NASDAQ:AMZN), Costco Wholesale Corporation (NASDAQ:COST), Target Corporation (NYSE:TGT), Dollar General Corporation (NYSE:DG), Macy's Inc , Kohl's Corporation (NYSE:KSS), Dollar Tree, Inc. (NASDAQ:DLTR), Family Dollar Stores, Inc. (NYSE:FDO), Sears Holdings Corporation(NASDAQ:SHLD) and J. C. Penney Company, Inc. (NYSE:JCP).

WMT: Free Fundamental Analysis Report (email registration required)


Source: Wal-Mart Earnings Analysis Relative To Peers