Back to top

Analyst Blog

Retail giant Wal-Mart Stores, Inc (WMT - Analyst Report) is set to report its third-quarter fiscal 2014 results on Nov 14 before the market opens. Last quarter, it posted in-line results. Let’s see how things are shaping up for this announcement.

Factors to Consider this Quarter

A sluggish global retail sales environment has been hurting the retail giant’s sales and profits since the past few quarters. Restrained consumer spending in the U.S., which emanated from the recent hike in payroll taxes and higher gas prices have been hurting the top line. Besides higher taxes, weak pay and a tepid rate of hiring is also curbing consumer spending. We believe the gloomy consumer spending environment will not improve too much in the next few quarters. The economic strains in the U.S. and abroad are likely to pressurize its low-income shoppers for the rest of the year.

Due to weaker-than-expected performance in the first half of 2014, Walmart sharply lowered its net sales and earnings growth guidance for fiscal 2014 at the second quarter conference call. Moreover, the challenging sales environment, inventory concerns as well as currency headwinds are expected to hurt second half sales as well.

Earnings Whispers?

Our proven model does not conclusively show that Walmart is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, #2 or #3 for this to happen. That is not the case here as shown below.

Negative Zacks ESP:The Most Accurate estimate stands at $1.12 per share while the Zacks Consensus Estimate is higher at $1.13. That is a difference of -0.89%.

Zacks Rank #3 (Hold):Walmart’s Zacks Rank #3 (Hold) when combined with a negative ESP makes surprise prediction difficult.

We caution against stocks with Zacks Ranks #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Here are some other companies in the retail and wholesale sector that can be considered as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Best Buy Inc (BBY - Analyst Report), Earnings ESP of +9.09% and a Zacks Rank #1 (Strong Buy).

Kroger Co. (KR - Analyst Report), Earnings ESP of +1.89% and a Zacks Rank #3 (Hold).

hhgregg, Inc (HGG - Analyst Report), Earnings ESP of +2.08% and a Zacks Rank #3 (Hold).

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
RPC INC RES 24.91 +8.35%
LITHIA MOTO… LAD 94.59 +4.60%
DELTA AIR L… DAL 39.15 +3.90%
FLAMEL TECH… FLML 14.51 +3.50%
SOUTHWEST A… LUV 28.87 +2.92%