J.P. Morgan Reiterates Neutral Rating, $75 PT on Wal-Mart Stores Following In-Line 1Q13 EPS

In a report published Friday, J.P. Morgan analyst Christopher Horvers reiterated a Neutral rating and $75.00 price target on Wal-Mart Stores

. In the report, Horvers noted, “WMT reported 1Q13 EPS of $1.14, in line with consensus and our estimate with a sales miss offset by better than expected margins partly due to the benefit of lower incentive comp. We believe this quarter confirmed the tenets of our February downgrade to Neutral as WMT faced a flattening curve of improved execution and tough comparisons fueled partly by favorable weather and inflation a year ago while customers were burdened by delayed tax refunds and the 2% payroll tax increase. Traffic was down 1.8% vs. down 0.1% in 4Q (which was the first quarter of negative traffic since 3Q11), resulting in (1.4%) comparable-store sales at WMT US. Like most of retail, the cool spring negatively impacted the quarter (particularly in seasonal categories) but WMT saw the greatest impact from the delay in tax refunds (and estimated that comps would have been close to flat ex this effect). In total, the combined negative effect from delayed tax refunds, the 2% increase in payroll taxes, reduced inflation, and unfavorable spring weather could have weighed down WMT US comps by “as much as 200 bps on comparable store sales.” Looking ahead, this plus the 40-bp easing of comparisons into 2Q get you to the midpoint of WMT's comp guide of 0-2% for the core division.” Wal-Mart Stores closed on Thursday at $78.50.