Deutsche Bank Gives A 'Wal-Mart' Alert

In a report published Thursday, Deutsche Bank analyst Paul Trussell commented that

fourth quarter same-store sales of 1.6 percent were "impressive" and bodes well for retailers with exposure to low-income consumers. However, the analyst cautioned that the company's investments in 2015 in labor and e-commerce are "much heavier than expected." Trussell noted that Wal-Mart's 2015 earnings per share guidance of $4.70 to $5.05 implies a seven percent to flat growth versus 2014 levels and falls below his expectations by one percent to five percent. The analyst added that the variance is due to a new wage structure ($0.20), e-commerce investment ($0.06-$0.09) and foreign exchange (~$0.10 headwind). Trussell offered a 2015 earnings per share estimate of $4.87 driven by same-store sales growth of 1.4 percent at Wal-Mart U.S. and 2.0 percent at Sam's Club. At the same time, the analyst suggested a new $82 price target (from a previous $86) is based on a 16x revised 2016 earnings per share estimate of $5.15 (from a previous $5.40).