Walmart Second Quarter Earnings Preview

Walmart [[WMT]] is scheduled to report their second quarter results before the market opens on Thursday, August 13. Based on our analysis, we at are expecting WMT to report slightly better than expected results that exceed Wall Street’s consensus expectations.


Analyst Expectations

We are forecasting revenues of $103.34 billion and EPS of $.87. This would represent a 1% increase in revenues from last year’s $102.67 billion in the same period. The current analyst consensus estimates calls for revenues of $103.12 billion and EPS of $.86. On May 14, the company provided second quarter guidance of $.83 – $.88 EPS.


After being the top Dow stock in 2008, Walmart’s shares have been one of the Dow index worst performing stocks this year. Investors who have seen their portfolio’s ravished over the last two years have been shifting into riskier investments with the hope of capitalizing on big gains as the economy recovers. However, Walmart continues its strong performance and will likely be one of only two Dow stocks (Hewlett Packard being the other) that will post a y/y growth in their quarterly earnings.


Despite Wal-mart’s lagging share price this year, we continue to view their stock as one of the safer options for investors. There is likely little downside with the retail giant trading near its 52-week low. As economic conditions improve, we believe there will be greater upside than many are anticipating as many of the customers gained during this recession will likely remain Walmart customers.


Stock Performance

Since the beginning of 2009, Walmart’s shares have dropped over 11%. Last year, Walmart was the star of the Dow as their shares gained 18% while the Dow Jones industrial average fell 34%.



Shares are now trading at 13x consensus 2010 EPS estimates. This is inline with the relative valuations of their peer group. At current valuation levels we feel that Walmart’s shares are very attractive and would expect a solid return over the next 12-18 months.


Recommendation: Buy with a $56 price target.


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