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Wal-Mart Stores Inc (WMT) Stock: The Turnaround Is Real!

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Most of the time when the instinctive response to an earnings report is, "it could have been worse," the stock in question doesn't fare particularly well. Not so with Wal-Mart Stores Inc (NYSE: WMT ) to start the new (and shortened) trading week, however. WMT stock is up firmly on Tuesday following a fiscal Q4 report that, despite falling just a hair short of revenue expectations and falling outright on the earnings front, was a pleasant surprise.

Wal-Mart Stores Inc (WMT) Criticizes Border Tax, And Rightfully So

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As it turns out, the world's biggest brick-and-mortar retailer can be competitive online, too.

Maybe, just maybe, Walmart's turnaround plan and its corresponding expenses are finally getting the traction that WMT stock holders were hoping for.

Walmart Earnings Wrap-Up

For the quarter ending in January - which includes the all-important holiday shopping season - Walmart earned an operating profit of $1.30 per share on sales of $130.9 billion. Analysts were looking for income of only $1.28 per share of Walmart stock, though those same analysts expected revenue of $131.1 billion.

Year-over-year, profits were down from $1.43 per share in last year's Q4, but sales were up from $129.7 billion.

One of the quarter's top bright spots was U.S. same-store sales growth of 1.8%; the market was only expecting comps of 1.3%.

Even brighter was the 29% improvement in online sales . Granted, last year's $3 billion purchase of up-and-coming e-commerce outfit Jet.com drove the bulk of that growth, but even on a pro-forma basis, WMT mustered some growth with its online sales efforts thanks to a boost from online grocery sales.

Sam's Club retail (non-gasoline) sales grew 2.4% year-over-year, and when stripping out the adverse impact of the frothy U.S. dollar, its international division's top line was up 3% .

The Plan Is Finally Working

For the record, last quarter's same-store sales increase is the biggest quarterly improvement the company has seen since the middle of 2012. It also marks the 10th consecutive quarter of same-store sales growth.

It's not been an easy road to travel. Brutal competition from Amazon.com, Inc. (NASDAQ: AMZN ) has made it difficult for WMT to cost-effectively steal online market share. Realizing it simply had to bite the bullet and lay out some cash, though, a little over a year ago, the company told current and potential owners of Walmart stock it would be shelling out $2 billion - not counting the Jet acquisition - to boost its e-commerce presence.

That spending seems to have helped, if only in the sense that it didn't lose share to Amazon.

More recently, Walmart took another shot at Amazon.com, offering free shipping on any online purchase of $35 or more - no fee-based membership necessary. Amazon felt threatened enough to lower its free-shipping threshold to the same dollar amount.

It's not just a more potent e-commerce plan of attack that has investors taking a fresh look at Walmart, though.

WMT also has invested more in its employees, raising all hourly wages to at least $10 per hour early last year, and recently incurred the expense of closing several dozen of its U.S. Express stores and Neighborhood Markets stores , which were proving to be a drag on Walmart's overall results.

The 1.4% uptick in last quarter's foot traffic and slight increase in the size of the average transaction both suggest the recent moves were a step in the right direction. Supercenters are Walmart's strength.

Looking Ahead for WMT Stock

For the quarter currently underway, Walmart expects to earn between 90 cents and $1 per share, versus analyst expectations of 96 cents. For the full year, the retailer anticipates earning between $4.20 and $4.40 per share of WMT stock, compared to analyst expectations of $4.33 per share. The first quarter's consensus estimate would be weaker than year-ago earnings levels, though the full-year outlook would end a three-year stretch of diminishing earnings.

The growth outlook is a plausible one too, even if not jaw-dropping.

Simply put, relatively new Walmart CEO Doug McMillon - who took the helm in early 2014 - has finally created a much-needed course correction for a boat that does anything but turn quickly.

With the boat now pointed in the right direction, WMT stock has at least earned another look from investors who had shelved it on a more permanent basis.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.

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The post Wal-Mart Stores Inc (WMT) Stock: The Turnaround Is Real! appeared first on InvestorPlace .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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