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Wal-Mart Earnings Preview: Calm Before The Holiday Shopping Season Storm?

Wal-Mart Earnings Preview: Calm Before The Holiday Shopping Season Storm?
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Wal-Mart Stores, Inc. (NYSE: WMT) will report its third quarter results on Thursday before market open. Analysts are expecting the world's largest retailer to earn $1.12 per share on revenue of $118.35 billion.

Wal-Mart last reported its quarterly results on August 14. The company earned $1.21 per share, in line with what analysts were expecting while revenue of $120.12 billion (an increase of 2.8 percent year over year) was $1.12 billion more than analysts expected. At that time, Wal-Mart lowered its full-year EPS guidance to a range of $4.90 to $5.15 from $5.10 to $5.45.

Comps were flat in the second quarter, while margins dipped 70 basis points for Wal-Mart, U.S.; Sam's Club's gross profit rate fell 50 basis points; Wal-Mart International saw strong performance in Brazil and Japan; Canada and Mexico experienced margin pressures.

Related Link: Wal-Mart, Target And Macy's All Don Black This Thanksgiving

Wal-Mart did note a strong performance in e-commerce with double-digit growth in the United States, U.K., Brazil and China. As a whole, global e-commerce sales rose 24 percent.

In a note to clients on Tuesday, Morgan Stanley's Simeon Gutman wrote that Wal-Mart can deliver a third quarter earnings per share of $1.10 and revenue could come in better than expected.

Gutman estimates U.S. comps could rise to 0.5 percent, though expectations among analysts are call for comps to be closer to flat.

Quarterly Highlights

Wal-Mart introduced a new GoBank checking account with no fees for overdrafts and no minimum balance requirements. The requirements to open an account are less stringent than traditional banks typically require.

Wal-Mart announced Kevin Systrom, co-founder of Instagram, to its board of directors.

Wal-Mart's CEO Doug McMillon spoke at an investor day presentation and detailed the company's plans to improve the shopping experience through price, assortment and access improvements.

What Else To Look Out For?

On October 15, Wal-Mart lowered its fiscal 2015 sales growth to between 2 percent and 3 percent from previous guidance of 3 percent to 5 percent. Looking further, the company expects its capital investments to be $11.6 billion to $12.9 billion in fiscal 2016.

While not expected to impact third quarter performance, Wal-Mart said it plans to cut back pricing on 20,000 items in anticipation of an ultra-competitive holiday shopping season. Investors should expect management to further clarify its holiday plans in the coming weeks.

Lower oil prices are expected to factor in to Wal-Mart and other retailer's quarterly reports. Bank of America's Robert Ohmes wrote in a note on Tuesday that a continued gas price decline could "ease pressure" on Wal-Mart's low-income consumers, but the impact won't be visible until late in the fourth quarter. The analyst adds that the benefit of lower oil prices could be more seen in the first half of 2015.

Posted-In: holiday shopping season Kevin Systrom Sam's Club Simeon Gutman Wal-MartAnalyst Color Previews Trading Ideas Best of Benzinga


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