By Craig Bowles
Wal-Mart Stores, Inc. (NYSE:WMT) is slated to report 1Q 2015 earnings before the bell on Thursday, May 15th. The earnings release is expected at approximately 7:00 a.m. EST with a pre-recorded call through phone numbers available at Wal-Mart Investor Relations. Results from the world's largest retailer and constituent of the Dow Jones Industrial Average tend to heavily influence the direction of the equity index futures.
Outliers & Strategy
- Earnings Per Share from Continuing Operations: The value for this measure is most often the figure that compares with consensus estimates. If an EPS from Continuing Operations is unavailable, GAAP EPS will be the comparable value. Wal-Mart projected EPS from continuing operations of $1.10 to $1.20 for the 1Q period. The current Street estimate is $1.15 (range $1.10 to $1.20). Estimates have been reduced from $1.24 three months ago. (Source: Yahoo! Finance) Wal-Mart has been 1c below and above estimates the last four quarters.
- Revenues: Analysts expect an increase of 1.8% y/y to $116.25 bln (range $114.70 bln to $118.33 bln).
- Comparable Store Sales: Wal-Mart said in February that comp sales were slow due to weather but expected the rest of the quarter to be positive. According to Zack's Investment Research, analysts are expecting 0.0% (range -1.0% to 0.5%).
- Earnings Per Share Guidance for 2Q2015: The current Street estimate is $1.28 (range $1.22 to $1.33). Estimates have been reduced from $1.34 three months ago.
- Earnings Per Share Guidance for FY2015: Current guidance is $5.10 - $5.45. The current Street estimate is $5.30 (range $5.15 to $5.42). Estimates have been reduced from $5.56 three months ago.
- Wal-Mart insiders sold 166,049 shares over the last six months but insider selling has become the norm for several years. Continuing another norm is the annual $15 billion stock buybacks.
- Dividend yield of 2.4% compares to a 5-year average of 2.3% and industry's 2.0%.
- Wal-Mart results could also impact retailers, such as Target (NYSE:TGT) and Costco (NASDAQ:COST) that report at a later date.
- Wal-Mart shares have a 1-day average price change on earnings of 2.08%. Options are pricing in an implied move of 2.23% off earnings.
- 05/06 Wal-Mart's online sales grew 30 percent last year compared with Amazon's (NASDAQ:AMZN) 20 percent growth, according to a post on Yahoo! Finance.
- 04/17 Wal-Mart's new low-cost service allows customers to transfer money to and from more than 4,000 Wal-Mart stores nationwide for up to 50 percent less than similar offerings on the market.
- 04/15 William Blair downgraded Wal-Mart to Underperform from Market Perform citing e-commerce competition, unique challenges due to the company's size, and the prospect of sector rotation late in the economic cycle, according to a post on TheEconomicDaily.com.
- 03/27 Wal-Mart is suing Visa for $5 billion over what it says were unreasonably high fees, according to a post on BusinessInsider.com.
Wal-Mart has found support over the last year at around $72. The stock is currently testing an area where the Q4 rally found resistance, so could have trouble pushing above $80 in the near-term. That being said, the stock was relatively flat for a decade until late 2011, so the potential for large move is increased. (Chart courtesy of StockCharts.com)
Wal-Mart's ability to limit downside price action is supported by $15 billion per year of stock repurchasing power. Given the recent rise in the stock to a previous resistance area, the company probably needs to beat estimates by 3-4c with revenue above the mid-point of the analyst range ($116.5 bln) and closer to $116.8 bln. Comp sales above flat would be a surprise. Guidance is always a focus and expectations have already been lowered for the next quarter.
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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.