Shares of Wal-Mart Stores Inc. (WMT) reached a 52-week high of $88.09 on Nov 28, 2014 and eventually closed at $87.54. Shares of this retail giant have been rising since the company delivered in-line earnings and better-than-expected revenues in the third quarter of fiscal 2015, after posting six weak quarterly results in a row.
Third Quarter Fiscal 2015
On Nov 13, Wal-Mart reported third quarter fiscal 2015 results, wherein adjusted earnings of $1.15 per share matched the Zacks Consensus Estimate and increased 0.9% from the year-ago earnings of $1.14 per share. Positive comps at Walmart U.S., improved performances at Sam's Club and the international business and a lower-than-anticipated tax rate contributed to earnings growth, which remained within management’s guidance range of $1.10 and $1.20 per share.
Total revenue of the retailer increased 2.9% to $119.0 billion (including membership and other income) and beat the Zacks Consensus Estimate of $118.3 billion. The better-than-expected sales were driven by improvements in Sam’s Club and the International business, higher neighborhood market sales in the U.S. and strong e-commerce growth.
Sales were encouraging as the company delivered positive comp sales of 0.4% driven by relatively balanced growth in traffic and ticket. The positive comps came after the company posted weak results in the past six quarters due to a tough economic environment.
Fourth Quarter Fiscal 2015 Outlook
For the fourth quarter of fiscal 2015, Walmart expects adjusted earnings to range between $1.46 and $1.56 per share, lower than the last year's adjusted earnings per share of $1.60. However, Walmart expects U.S. comp sales to be between flat and 1% for the 13-week period ending Jan 30, as against a decline of 0.4% last year. This signals that the company may benefit from improved consumer confidence and spending ability following falling gas prices and a drop in U.S. unemployment.
Sam’s Club comp sales, without the impact of fuel sales, are expected to be flat to an increase of 2% compared to a decline of 0.1% last year.
Amid the weak scenario, the company is making efforts to understand the evolving needs of its customers to re-gain their confidence. The company has shifted its investment plans and will lower investment in larger stores, while investing more in e-commerce initiatives. (Read: Wal-Mart Cuts Sales View, Investing More in E-Commerce)
Walmart carries a Zacks Rank #3 (Hold).
Other Stocks to Consider
Better ranked retailers include Safeway, Inc. (SWY), Foot Locker, Inc. (FL), and L Brands, Inc. (LB). While Safeway sports a Zacks Rank #1 (Strong Buy), Foot Locker and L Brands hold a Zacks Rank #2 (Buy).
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