Wal-Mart (WMT) Slides After Posting Lower Than Expected 3Q Sales

Shares of retail giant Wal-Mart (WMT: Charts, News) slid yesterday after the company disappointed investors with lackluster third quarter earnings that topped on earnings but missed on revenue. Wal-Mart's third quarter earnings came in at $1.08 per share, or $3.64 billion, which beat estimates by a penny, but it posted revenue of $113.2 billion, which missed the analyst consensus of $114.96 billion.

Excluding a negative currency impact from a strong U.S. dollar, Wal-Mart actually generated revenue of $114.9 billion, still shy of analyst forecasts. Although earnings increased by 11.3% and revenue rose by 3.4% from the prior year, analysts were disappointed in the superstores' weakness in sales. Daily Chart
The company's membership fees and other income rose by 2.1% to $725 million. CEO Mike Duke remained upbeat regarding the company's third quarter financials. "We're very pleased with our financial performance for the third quarter and the dedication and hard work of our associates serving Walmart customers and communities around the world," Duke stated. "Earnings per share were $1.08, which represents an 11.3 percent increase over the third quarter last year." Wal-Mart's revenue was also boosted by a lower tax rate of 31.3%, which was offset by $105 million in pre-tax charges. $69 million of these charges came from unemployment claims in Brazil, while the rest came from $36 million in damages from Hurricane Sandy. The company's International Sales segment increased its revenue 2.4% to $33.2 billion. Wal-Mart finished the quarter with free cash flow of $7 billion, more than double the $3.4 billion in the prior year quarter. Its total income from operations also rose 8.7% to $3.6 billion. CFO Charles Holley touted the company's strong cash flow, stating, "The strength of our free cash flow allows us to provide good returns to our shareholders through dividends and share repurchases." Looking forward, Wal-Mart slightly reduced its full-year guidance, from a range between $4.88 to $4.93 per share to a range between $4.83 to $4.93 per share. Holley pointed out that Wal-Mart would still post EPS growth over the prior year, when it earned $4.54 per share. Bullish analysts believe that Wal-Mart's recent pullback represents a strong buying opportunity in a normally low beta stock, citing strong sales momentum from back-to-school sales, localized product offerings, and Black Friday and subsequent holiday sales. Meanwhile, bearish analysts believe that Wal-Mart's market share will be steadily eroded by deep discount retailers Dollar General (DG: Charts, News) and Dollar Tree (DLTR: Charts, News), which tend to outperform superstores like Wal-Mart and Target (TGT: Charts, News) in times of economic turmoil. U.K. supermarket chain Asda, which is a subsidiary of Wal-Mart, also warned of a "tough Christmas" after revenue growth slowed down in the third quarter. Asda only reported same-store sales growth of 0.3%, excluding fuel, down from 0.7% in the prior year quarter. Shares of Wal-Mart now trade at 12.7 times forward earnings with a 5-year PEG ratio of 1.6. The stock has traded in a 52-week range between $56.26 and $77.60, and pays a quarterly dividend of 40 cents per share - a 2.32% yield at current prices. Other News About WMT Wal-Mart Stores, Inc. Q3 Sales Miss Estimates, Shares Dive Wal-Mart posts a rare miss in earnings; shares slide. Wal-Mart's Asda Sees Tough Christmas as Third-Quarter Sales Slow Wal-Mart's subsidiary Asda faces tough times in the U.K. Other Stocks in the News Not so Golden: McDonald's Ousts U.S. Chief McDonald's replaces its U.S. chief in an effort to turn around lagging sales. Apple Inc. Will Not Negotiate An HTC-Like Deal With Samsung Apple teams up with HTC to take down their common enemy - Samsung. Copyright 2012 by InvestorGuide.com, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. The news, analysis, commentary and profile information is not meant to be comprehensive, and the data provided is not guaranteed to be accurate. WebFinance Inc., the publisher of this newsletter, is not a registered investment advisor or a broker/dealer. This is not a stock recommendation newsletter but rather a source for investment ideas, and we encourage you to fully research any company before considering investing. The opinions expressed herein are those of the author and do not necessarily represent the views of nor are they endorsed by WebFinance Inc. No employee of WebFinance has owned or currently owns any shares in the company described above. The above is neither an offer nor solicitation to buy or sell any securities. The trading of securities may not be suitable for all potential readers of this newsletter, and the purchase of stocks mentioned in this newsletter may result in the loss of some or all of any investment made. We recommend that you consult a stockbroker or financial advisor before buying or selling securities or making investment decisions. We are not responsible for claims made by advertisers and sponsors. Anyone who makes decisions based on what they read here does so at their own risk and cannot hold WebFinance Inc. (DBA InvestorGuide.com, Inc.) or its employees responsible.

Published on Nov 16, 2012
By Leo Sun
Leo Sun
Leo Sun is a freelance finance writer and position trader. He focuses on a combination of value and momentum investing, with a strong interest in the trading philosophies of Warren Buffett and Peter Lynch. Leo also has experience writing articles to help small business owners acquire loans and manage their finances. He regularly contributes to the Stock of the Day analysis.

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