Wal-Mart Keeps Wall Street Guessing

They say a picture’s worth a thousand words. And that’s certainly the case today: While much of the S&P 500 is in the red today (on concerns that the Fed’s easy money policy may draw to a close), we see a lone patch of green in the Services sector: Wal-Mart Stores Inc. (WMT).

The cause? Better than expected fourth-quarter earnings, which were released this morning. If you remember back to last week, shares of WMT retreated after an internal email about soft February sales was leaked to the public. However it’s clear that Wal-Mart is back in Wall Street’s good graces thanks to the solid quarterly results, so let’s go over the highlights.

The Top Line: Last quarter, the retailer captured higher holiday sales thanks to its competitive prices and layaway plan. Total sales advanced 4% year-over-year to $127.92 billion; international sales jumped 7% while domestic sales rose 3%.

The Bottom Line: Profit climbed 9% to $5.61 billion; adjusted earnings came in at $1.67 per share.

The Street View: Analysts forecast earnings of $1.57 per share on $128.77 billion in sales, so Wal-Mart posted a 6% earnings surprise and a slight sales miss.

Forward Guidance: Looking ahead to the first quarter, management is being cautious to account for higher gasoline prices and payroll tax increases—which are expected to reduce consumer spending power. Wal-Mart expects earnings in the range of $1.11 to $1.16 per share, representing 2% to 6% growth. This is below the Street view of $1.18 per share. For fiscal 2014, Wal-Mart forecasts earnings in the range of $5.20 to $5.40 per share, which is in line with the Street view of $5.37 per share.

Dividend Buzz: Wal-Mart also declared dividends for the next four quarters—the company is hiking its quarterly payout by 18%. WMT next goes ex-dividend on March 8, so shareholders of record will receive $0.47 per share on April 1. Wal-Mart currently boasts a 2.7% annual yield, making it the third highest dividend in the industry (out of 19 players).

My Take: I have this company in my Blue Chip Growth newsletter, and I’m keeping Wal-Mart at a buy for its generous dividend, the fact that it’s in the middle of a $15 billion stock buyback program and that it continues to dominate retail. With Congress still working out its debt issues, its good business for Wal-Mart to be conservative, but I’m encouraged that the analyst community forecasts 9% earnings growth for the next few quarters.


Louis Navellier

Louis Navellier

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