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Goldman Sachs Issues A Buy Rating on Wal-Mart

Goldman Sachs Issues A Buy Rating on Wal-Mart

In a Goldman Sachs (NYSE: GS) research report released this morning, Wal-Mart Stores, Inc. (NYSE: WMT) has been upgraded to a ‘Buy’ and placed on the ‘America's Buy List.’

Goldman cites strong EPS growth, coming from three sources, as the catalyst for a potential 14% return from current levels.

This strong EPS growth will come from stronger sales due to a “positive shift from deflation to inflation,” improved expense control through “strong commitment and actions to leverage SG&A,” and, finally, increased margins by “intensified global sourcing to yield strong pricing alongside margin expansion.”

EPS estimates have been raised from $3.97 to $4.11 for FY2010 and from $4.49 to $4.34 in FY2011.

Goldman states “with the stock trading at it’s typical floor valuation, we see limited downside risk in the shares.”

Expectations for Wal-Mart have been “muted,” so any upside to consensus would lift the stock to normal valuation levels (14.9x 5-year average).

Goldman's 12 month price target for Wal-Mart has been raised from $58 to $60 to show the improved EPS estimates. The target multiple has remained unchanged at 14.5x.

Shares of Wal-Mart (NYSE: WMT) were trading higher, up 2.55% in pre-market on Friday.


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