Here's What The Buy Side Expects From Wal-Mart On Thursday

May.14.14 | About: Wal-Mart Stores, (WMT)

Summary

This quarter, Wall Street expects Wal-Mart's earnings to come in relatively flat compared to last year.

However, the Estimize community is looking for modest year-over-year growth of 3 cents per share and year-over-year revenue growth to the tune of 2%.

Recent earnings from Macy's suggest that the retail economy has not improved as much as optimists had hoped.

Wal-Mart Stores, Inc. (NYSE:WMT) is set to report FQ1 2015 earnings before the market opens on Thursday, May 15. Wal-Mart is set to report one day after Macy's (NYSE:M) opened up the large retail earnings season on Tuesday. Macy's beat Wall Street's estimates by 1 cent per share, largely due to share purchasing. Macy's earnings report may be a sign that the retail economy has not improved as much as optimists had hoped for, after a particularly weak quarter this winter due to the poor weather.

This quarter, Wall Street is expecting Wal-Mart's earnings to come in 1 cent higher than they did in FQ1 of last year and for revenue to grow by only 1.5%. Here's what investors are expecting from Wal-Mart on Thursday.

The information below is derived from data submitted to the Estimize.com platform by a set of Buy Side and Independent analyst contributors.

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(Click here to see estimates and interactive features for WMT.)

The current Wall Street consensus expectation is for Wal-Mart to report $1.15 EPS and $115.947B revenue, while the current Estimize.com consensus from 24 Buy Side and Independent contributing analysts is $1.17 EPS and $116.429B in revenue. This quarter the buy side, as represented by the Estimize.com community, is expecting Wal-Mart to beat Wall Street's expectations by a considerable margin on both EPS and revenue.

Over the previous six quarters, the consensus from Estimize.com has been more accurate than Wall Street in forecasting Wal-Mart's EPS and revenue three times each. By tapping into a wider range of contributors including hedge fund analysts, asset managers, independent research shops, students, and non-professional investors Estimize has created a data set that is more accurate than Wall Street up to 69.5% of the time.

More importantly, it does a better job of representing the market's actual expectations. It has been confirmed by Deutsche Bank Quant. Research and an independent academic study from Rice University that stock prices tend to react with a more strongly associated degree to the expectation benchmark from Estimize than from the Wall Street consensus.

The magnitude of the difference between the Wall Street and Estimize consensus numbers often identifies opportunities to take advantage of expectations that may not have been priced into the market. Here we are seeing a larger than usual differential between the earnings expectations from Wall Street and Estimize.

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The distribution of estimates published by analysts on the Estimize.com platform range from $1.13 to $1.27 EPS and from $115.833B to $118.100B in revenues. This quarter we're seeing a wide range of EPS estimates and a moderate range of revenue predictions.

The size of the distribution of estimates relative to previous quarters often signals whether or not the market is confident that it has priced in the expected earnings already. A wide distribution of estimates signals less agreement in the market, which could mean greater volatility post earnings.

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Throughout the quarter, the Wall Street EPS consensus fell from a high of $1.25 to $1.15 while the Estimize consensus decreased from $1.25 to $1.17. Meanwhile, Wall Street reduced its revenue consensus from $118.243B to $115.947B while the Estimize consensus also declined from $118.134B to $116.429B throughout the quarter. Timeliness is correlated with downward analyst revisions from the Estimize community going into the report are often a bearish indicator, although the Estimize consensus still remains significantly higher than Wall Street's.

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The analyst with the highest estimate confidence rating this quarter is j_holliman, who projects $1.16 EPS and $116.000B in revenue. j_holliman is ranked seventh overall among over 4,450 contributing analysts. Over the past two years, j_holliman has been more accurate than Wall Street in forecasting EPS and revenue 57% and 49% of the time, respectively, throughout 1,489 estimates.

Estimate confidence ratings are calculated through algorithms developed by deep quantitative research which looks at correlations between analyst track records and tendencies as they relate to future accuracy. In this case, j_holliman expects Wal-Mart to edge past the Street's expectations but fail to live up to the consensus from the Estimize community.

This quarter, Wall Street is expecting Wal-Mart's earnings to come in relatively flat compared to last year. However, the Estimize community is looking for modest year-over-year growth of 3 cents per share and year-over-year revenue growth to the tune of 2%. On Thursday, the Estimize community expects Wal-Mart to beat Wall Street's expectations by 2 cents per share in earnings and $482 million in sales.

Disclosure: None.