Wal-Mart Earnings Preview: Analyst Sees 'Soft Print Despite Gas Price Tailwind'

In a report published Thursday, MKM Partners analysts maintained a Neutral rating on Wal-Mart Stores, Inc (NYSE: WMT), with a price target of $80.Wal-Mart's share price has declined by 13 percent since January, without a potential spending boost by lower income customers. The company's stock was one of the best performers last year and early this year, a temporarily decline in gas prices below $2 per gallon, which raised investor expectations of a consumer spending boost."While this could potentially be a set-up for a near-term trading bounce on even a small amount of good news, we think the stock, at 14.7x our 2016 EPS estimate, is close to fair value," the analysts said.Wal-Mart is likely to report in-line 1Q15 results, with a marginal increase in same-store sales at its Walmart and Sam's stores. The company's EPS for the quarter is likely to be marginally lower y/y due to the recent hike in the lowest entry-level wage rate. Other factors restricting Wal-Mart's earnings are investments training, department manager add-back, incremental e-commerce investments and currency headwinds.In the report MKM Partners noted, "We continue to expect a 1.5% increase in same-store sales at Wal-Mart U.S., consistent with 4Q14 and vs. 2/19/15 guidance of 1%-2%. We believe traffic remained slightly positive against another easy comparison, but we do not think there was any sequential improvement, despite numerous macro tailwinds, including cycle-low unemployment, near-cycle-high confidence, and gas prices down more than $1/gal. y/y throughout the period." "We do not see a catalyst that could drive a meaningful acceleration in sales, and continue to expect lackluster top-line growth and down earnings in FY15," the analysts added.