5 Good Things And 4 Bad From Wal-Mart's Earnings

Wal-Mart Stores, Inc. WMT reported an earnings beat for its fiscal third quarter of 2017. Although comps narrowly missed expectations, they “may have beat had it not been for unusually warm weather which hurt apparel and other sales,” Barclays’ Karen Short said in a report. She maintains an Overweight rating on the company, with a price target of $82.

Wal-Mart reported its quarterly EPS at $0.98, versus Barclays’ estimate of $0.97. EPS benefited from a one-off gain and a lower tax rate. Short reduced the EPS estimates for Q4 and FY 2017 from $1.18 to $1.25 and from $4.33 to $4.27, respectively, citing lower comps and operating margin at Wal-Mart U.S., weaker international revenue and higher expenses.

5 Positives And 4 Negatives

Short highlighted the positives from the quarter:

1. Steady traffic growth at Wal-Mart U.S.
2. A larger basket size driven by Fresh.
3. A 32bps gross margin expansion at Wal-Mart U.S., despite tough comps and price investment.
4. Accelerated in e-commerce GMV growth to 28.6 percent year-over-year.
5. A 6 percent decline in Wal-Mart U.S. comp store inventory.

The analyst's negatives:

1. An expected slowdown in Wal-Mart U.S. comps in Q4.
2. A 130bps rise in SG&A rate at Wal-Mart U.S.
3. Weaker-than-expected operating income at Sam's Club.
4. International segment facing continued currency headwinds.

In Friday's pre-market session, Wal-Mart was up 0.13 percent at $69.28.