Wal-Mart (WMT) Stock Loses Ground After Fourth Quarter Earnings Report

Shares of Wal-Mart Stores, Inc. (WMT: Charts, News) fell by -$2.41 or 3.86 percent to close at $60.07 per share on Tuesday after the company reported slightly worse than expected diluted earnings per share of $1.44 in its fourth quarter. This result was computed by subtracting the $0.07 per share that was attributed to gains from real estate sales and tax items from the $1.51 earnings per share the company originally reported.

The consensus of market analysts was anticipating a marginally better Q4 earnings result of $1.45 per share for Wal-Mart.

This prompted profit taking to set in for a stock that had just recently rallied up to just under key resistance seen in the $63.85 to $63.95 region.

In terms of Wal-Mart's consolidated operating income, the Bentonville, Arkansas based retailer posted a respectable result of $8.4 billion for its fiscal fourth quarter that ended on January 31st. Its consolidated operating income for the year came in at $26.6 billion, with diluted earnings per share of $4.54 on a yearly basis.

Daily Chart
Wal-Mart Stores, Inc.'s stock has rallied considerably over the last few years, trading in a notable upwards trend to reach the $62.57 level just last Friday, before dropping significantly during Tuesday's session to close at $60.07.

Taking into accounts its new earnings data, the company's stock currently trades at roughly 13.2 times earnings. This is slightly above Wal-Mart's competitor Target (TGT: Charts, News), but well below retailers like Costco (COST: Charts, News) and PriceSmart (PSMT: Charts, News) that have current P/E ratios of $25.4 and $33.4 respectively.

Furthermore, a closer analysis of Wal-Mart Stores' latest earnings and sales report reveals that the superstore operator saw its net sales rise by 5.8 percent to $122.3 billion in its fiscal fourth quarter, which concluded on January 31st. Nevertheless, analysts were concerned that this rise in sales was accompanied by a decline in the firm's margin, as it cut prices during the key pre-holiday period.

For the same period last year, the firm's net sales figure was $115.6 billion, and its result for the entire year was $435.1 billion, up 3.9 percent versus the prior year. Wal-Mart attributed $2.4 billion of its net sales improvement to its recent acquisition of the Netto stores in Great Britain and the Massmart stores in South Africa.

In addition, the company noted a $1 billion loss due to foreign exchange rate movements in its fourth quarter, although the yearly forex impact on its bottom line was an overall gain of $4 billion.

Mike Duke, the President and CEO of Wal-Mart Stores, said about his company's development overseas that, "Walmart International delivered strong growth through both comp store sales and a record number of new units, including the acquisitions of Netto and Massmart." He enthusiastically added that, "Today, every segment of our business is stronger than it was a year ago, and we're in a great position for fiscal year 2013."

Overall, while Wal-Mart's recent earnings results showed progress, the stock's price is bumping up against heavy resistance anticipated just ahead of the $64.00 level, with its all-time high of $70.25 not far above that. Despite the recent run up in the stock in early 2012, a correction or consolidation period seems overdue and is now likely to prevail over the near term, making the stock seem more of a hold - or even a short term sell - than a buy.

Other News About WMT
High-End Retailers Report Strong Profits, but Walmart Still Struggles
Stores targeting high income customers improve, while Wal-Mart's margin falls on price cuts.
Wal-Mart Holiday Price Cuts Hit Profits
Wal-Mart's price cutting during the key pre-holiday period hurt its Q4 results. Other Stocks in the News
Dell Shares Fall on Earnings Miss, Outlook
PC Maker Dell Inc. forecasts a 7 percent sales drop in Q1 2012 versus the previous quarter.
DNA in Play as Life Technologies Joins Illumina Watch: Real M&A
Genetic sequencing technology sparks takeover interest.

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Published on Feb 22, 2012
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2020. Content published with author's permission.

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