We maintain our Neutral recommendation on
Wal-Mart Stores, Inc.
) following appraisal of its fourth quarter 2013 results.
Why the Reiteration?
Walmart posted better-than-expected fourth quarter earnings of
$1.67 per share and beat the prior-year earnings by 10.6%,
benefitting largely from a lower-than-expected effective tax rate
in the quarter. Top-line growth coupled with cost savings also
The fourth quarter fiscal 2013 results were ahead of the
company's earnings guidance range of $1.53 to $1.58 per share.
Total revenue climbed 3.9% to $127.9 billion but lagged the Zacks
Consensus Estimate of $129.2 billion. The company also posted
positive comparable store sales.
Overall, we are impressed with the company's size and scale of
operations. The company's significant exposure in the
international markets makes it the largest retailer in the world.
The company has 8,500 stores in 15 countries, under 55 different
names. Walmart also continues to expand internationally and in
the emerging markets through accretive acquisitions, new store
growth and positive comparable store sales.
Further, Walmart has also been focusing on expanding its
online business and has increased its share in Newheight Holdings
Ltd, a holding company that owns Chinese Internet retailer
Yihaodian, to approximately 51% during fiscal 2013. Walmart plans
to grow its retail square feet and expand its e-commerce
capabilities further in fiscal 2014.
However, Walmart expects decline in consumer spending going
ahead as middle-class consumers struggle to cope with rising gas
prices, delayed income tax refunds and higher payroll taxes.
Additionally, Walmart remains exposed to unfavorable foreign
currency translations due to its considerable international
presence. Moreover, we remain cautious about the weak economy and
rising costs, which keep us on the sidelines.
Walmart holds a Zacks Rank #3 (Hold). Other retailers that are
presently doing favorable business include
Harris Teeter Supermarkets Inc
The TJX Companies, Inc.
), all of them holding a Zacks Rank #2 (Buy).
HARRIS TEETER (HTSI): Free Stock Analysis
KROGER CO (KR): Free Stock Analysis Report
TJX COS INC NEW (TJX): Free Stock Analysis
WAL-MART STORES (WMT): Free Stock Analysis
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