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5 Reasons Why Wal-Mart (WMT) Should be in Your Portfolio
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Investors are looking for safe haven assets amid a volatile economy. The recent pullback in oil prices, slide in bank stocks, global growth issues and uncertainty about the timing of a Fed rate hike are weighing on investors’ sentiment.
That being said, retail giant Wal-Mart Stores Inc. (WMT - Free Report) with a market cap of $219.27 billion might be an intriguing investment choice right now. The Bentonville, AR-based company enjoys strong growth potential along with compelling fundamentals.
Wal-Mart: A Great Pick
Impressive VGM Score: Wal-Mart carries a VGM score of A. Here “V” stands for Value, “G” for Growth and “M” for Momentum and the score is the weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select winners. However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM score.
Wal-Mart fares well in the style score system too, with all the three Value, Growth and Momentum style score of A.
We note that focusing on Zacks Rank #1 (Strong Buy) and #2 (Buy) rated stocks with preferred individual Style Score, or VGM Score of A or B tends to yield higher returns. Wal-Mart is one such stock.
Rank and Estimates: Wal-Mart, a Zacks Rank #2 stock, has had a healthy run so far this year, gaining around 14.8% in price. Over the past 60 days, analysts have become increasingly bullish on the company, with 5 out of 12 estimates moving north for fiscal 2017 earnings.
Impressive Quarterly Results: Wal-Mart posted impressive first-quarter fiscal 2017 results last week with both earnings and revenues beating the Zacks Consensus Estimate owing to improved comparable store sales. Revenues increased 0.9% year over year and grew 4% on a constant currency basis. The decline in the International business was more than offset by growth in sales at Wal-Mart U.S. and Sam’s Club divisions.
Improving Comps Sales Growth at Wal-Mart U.S.: Wal-Mart is seeing positive comps at Wal-Mart U.S. for the past seven quarters, after delivering negative comps since the third quarter of fiscal 2013. Traffic improved for six consecutive quarters, owing to the company’s efforts to modernize its stores to boost traffic. Traffic also increased due to moderate improvement in consumer spending. The lower gas prices have eased consumer spending power a bit, the impact of which is seen in improved traffic at stores. Many of the U.S. customers are also using their tax refunds in shopping. Wal-Mart’s efforts to change its stores as per consumers’ demand helped the retailer attract some of the shoppers. In fact, the company continues to expect positive comps year over year at Wal-Mart U.S. in fiscal 2017.
Higher Investment in E-Commerce Category: Wal-Mart is putting a lot of effort and focusing on expanding its online business in order to gain larger market share than Seattle-based Amazon.com Inc. (AMZN - Free Report) , the leader in the online business.
The company’s website, Walmart.com, offers more than 7 million varieties of products. The company already offers a delivery service called “Walmart Pickup,” which lets customers place orders online and then pick them up from a nearby store for free. A related service, “Pickup Today”, allows shoppers to retrieve an online order within four hours from a store that already has the desired product in its inventory.
Wal-Mart has also launched its own mobile payment system called Walmart Pay that will allow shoppers to pay through its existing smartphone app.
Most recently, Wal-Mart has announced that its ShippingPass e-commerce subscription program will begin offering delivery in two days rather than three. The retailer is also cutting the price of the program by $1 to $49 a year. The effort is targeted at competing with Amazon’s Prime service which costs $99 annually. Prime also offers other perks such as free movies and TV shows.
In fact, the company expects to continue to invest aggressively in e-commerce initiatives in fiscal 2017.
Conclusion
Other stocks in the retail sector worth considering are The Kroger Co. (KR - Free Report) and Destination XL Group, Inc. (DXLG - Free Report) , both carrying a Zacks Rank #2.
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5 Reasons Why Wal-Mart (WMT) Should be in Your Portfolio
Investors are looking for safe haven assets amid a volatile economy. The recent pullback in oil prices, slide in bank stocks, global growth issues and uncertainty about the timing of a Fed rate hike are weighing on investors’ sentiment.
That being said, retail giant Wal-Mart Stores Inc. (WMT - Free Report) with a market cap of $219.27 billion might be an intriguing investment choice right now. The Bentonville, AR-based company enjoys strong growth potential along with compelling fundamentals.
Wal-Mart: A Great Pick
Impressive VGM Score: Wal-Mart carries a VGM score of A. Here “V” stands for Value, “G” for Growth and “M” for Momentum and the score is the weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select winners. However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM score.
Wal-Mart fares well in the style score system too, with all the three Value, Growth and Momentum style score of A.
We note that focusing on Zacks Rank #1 (Strong Buy) and #2 (Buy) rated stocks with preferred individual Style Score, or VGM Score of A or B tends to yield higher returns. Wal-Mart is one such stock.
Rank and Estimates: Wal-Mart, a Zacks Rank #2 stock, has had a healthy run so far this year, gaining around 14.8% in price. Over the past 60 days, analysts have become increasingly bullish on the company, with 5 out of 12 estimates moving north for fiscal 2017 earnings.
Impressive Quarterly Results: Wal-Mart posted impressive first-quarter fiscal 2017 results last week with both earnings and revenues beating the Zacks Consensus Estimate owing to improved comparable store sales. Revenues increased 0.9% year over year and grew 4% on a constant currency basis. The decline in the International business was more than offset by growth in sales at Wal-Mart U.S. and Sam’s Club divisions.
Improving Comps Sales Growth at Wal-Mart U.S.: Wal-Mart is seeing positive comps at Wal-Mart U.S. for the past seven quarters, after delivering negative comps since the third quarter of fiscal 2013. Traffic improved for six consecutive quarters, owing to the company’s efforts to modernize its stores to boost traffic. Traffic also increased due to moderate improvement in consumer spending. The lower gas prices have eased consumer spending power a bit, the impact of which is seen in improved traffic at stores. Many of the U.S. customers are also using their tax refunds in shopping. Wal-Mart’s efforts to change its stores as per consumers’ demand helped the retailer attract some of the shoppers. In fact, the company continues to expect positive comps year over year at Wal-Mart U.S. in fiscal 2017.
Higher Investment in E-Commerce Category: Wal-Mart is putting a lot of effort and focusing on expanding its online business in order to gain larger market share than Seattle-based Amazon.com Inc. (AMZN - Free Report) , the leader in the online business.
The company’s website, Walmart.com, offers more than 7 million varieties of products. The company already offers a delivery service called “Walmart Pickup,” which lets customers place orders online and then pick them up from a nearby store for free. A related service, “Pickup Today”, allows shoppers to retrieve an online order within four hours from a store that already has the desired product in its inventory.
Wal-Mart has also launched its own mobile payment system called Walmart Pay that will allow shoppers to pay through its existing smartphone app.
Most recently, Wal-Mart has announced that its ShippingPass e-commerce subscription program will begin offering delivery in two days rather than three. The retailer is also cutting the price of the program by $1 to $49 a year. The effort is targeted at competing with Amazon’s Prime service which costs $99 annually. Prime also offers other perks such as free movies and TV shows.
In fact, the company expects to continue to invest aggressively in e-commerce initiatives in fiscal 2017.
Conclusion
Other stocks in the retail sector worth considering are The Kroger Co. (KR - Free Report) and Destination XL Group, Inc. (DXLG - Free Report) , both carrying a Zacks Rank #2.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>