Deutsche Bank Sees Wal-Mart Cutting CapEx

Deutsche Bank issued a company update for Wal-Mart Stores, Inc. WMT on Tuesday and expected CapEx cuts to be announced this week.

Analyst Paul Trussell noted that with “SSS hampered by sluggish demand and strong competition and EPS growth limited with increased health care and e-commerce expenditures, we believe FCF and returns will likely be the focus of Wednesday's (10/15) [investor] meeting as the new management teams embarks on its own strategy.”

The report expected that CapEx will be cut approximately 10 percent.

Trussell believed that Wal-Mart in the U.S. “will emphasize improved convenience and fulfillment with a step up in both neighborhood market locations (ie. ~500 doors next year, up from 300- 400) and e-commerce efforts, while reducing supercenter growth by as much as 50 percent.”

The report concluded that a CapEx “cut would act as a favorable catalyst in our view, however, pressures on SSS and margins keeps us sidelined, particularly with the Street too high in our view (DB $0.14 below).”

Morgan Stanley recently lowered its price target for Wal-Mart ahead of the investor meeting.

Deutsche Bank maintained its Hold Rating and $75 price target, based on 14.0x forward earnings.

Wal-Mart Stores, Inc. recently traded at $78.25, up 0.89 percent.