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Earnings Preview: Wal-Mart

WMT

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Retail giant, Wal-Mart Stores Inc. (WMT - Analyst Report) is all set to report its second quarter fiscal 2013 results before market opens on August 16, 2012. The Zacks Consensus Estimate for the second quarter is pegged at $1.17 (estimated year-over-year increase of 7.3%) on revenues of $115.5 billion (year-over-year increase of 6.3%). The Zacks Consensus Estimate is at the higher end of the company’s guidance range of $1.13 to $1.18 per share.

First Quarter Recap

Wal-Mart Stores delivered robust first quarter earnings of $1.09 per share, which outperformed the Zacks Consensus Estimate by 5 cents per share and the prior-year earnings by 11 cents per share. The first quarter 2013 results also exceeded the company's guidance of $1.01 to $1.06 per share. The first quarter earnings improved on the back of better-than-expected top-line results.

Despite the negative impact from currency exchange translation of $800 million in the quarter, Wal-Mart’s consolidated net sales, including fuel, climbed 8.6% to $112.3 billion from $103.4 billion in the year-ago quarter. It also exceeded the Zacks Consensus Revenue Estimate of $110.6 billion. On a constant currency basis, sales increased 7.5% to $111.2 billion in the quarter.

Agreement of Estimate Revisions

Over the past 30 days, 4 of the 20 estimates on Wal-Mart were revised higher for both the second quarter and fiscal 2013. None of the estimates were revised in the opposite direction. Over the last 7 days, 1 estimate has moved up for both the second quarter and fiscal 2013.

Most of the estimates were revised after the announcement of the second quarter guidance in May 2012. The company has not announced any major news since then, which explains the stalemate in estimate revisions.

Magnitude of Estimate Revisions

With minimal estimate revisions, the consensus estimate for the second quarter has remained stagnant at $1.17 over the last 30 days. The consensus estimate for fiscal 2012 has however moved up by a penny from $4.90 to $4.91 over the last 30 days. There has been no change in estimates over the last 7 days.

Surprise History

Over the past four quarters, Wal-Mart has surpassed estimates thrice and missed only once, thereby resulting in an average earnings surprise of 1.68%. The company recorded a maximum positive surprise of 4.81% in the first quarter of fiscal 2013.

Our Recommendation

We currently have a Neutral recommendation on Wal-Mart. The stock carries a Zacks #2 Rank (a short-term ‘Buy rating) reflecting the upward movement in estimates.

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