Wal-Mart Doesn’t Share US Economy’s Bleak Outlook

Wal-Mart (NYSE:WMT) reported their fiscal year third quarter earnings on Thursday, and the results were somewhat surprising.  Wal-Mart reported earnings of $3.14B, or $0.80 a share, for the quarter ending October 31st.  For the previous year’s quarter the retailer reported $2.86B, or $0.70 a share.  Earnings from continuing for operations were $0.77 a share.  This was $0.01 above to the consensus analyst estimates and a penny also above Wal-Mart’s internal estimates.  Revenue for the quarter was up roughly 7% to $98.64B.

Looking into the future Wal-Mart slashed their estimates for its full fiscal year earnings from a range of $3.43 to $3.50 to a range of $3.42 to $3.46.  This includes a slash of fourth quarter earnings of to a range of $1.03 to $1.07 from an average estimate of $1.12.  Many investors expected these cuts going into the earnings call, and some investors were expecting an even larger cut.  This was displayed through the 4.39% gain in Wal-Mart’s stock yesterday, but lagged the S&P’s gain of 6.92%.

Obviously the future isn’t as bright as it once was, but that does not mean that all hope is lost.  Wal-Mart still stands to have revenues of $112.82B for quarter four in fiscal year 2008 according to an average of 15 analyst estimates.  This would be a quarterly year over year sales growth of 5.0%.  Wal-Mart has not missed consenus EPS estimates in the last four quarters, and in fact they have beaten estimates by either a penny or two in each of these quarters.  Through a deep recession Wal-Mart will be able to lead the competition with their pricing power.  Even during the beginning of the recovery after this world economic and financial crisis Wal-Mart should be able to hold in pretty well as consumers are skeptical and will probably continue to spend very frugally for a sustained period of time.

Analysts are currently projection a 5.8% year over year sales growth for the retail giant between this current fiscal year and the next. A bleak outlook for the United States or world economy does not necessarily mean a bleak outlook for Wal-Mart and their shareholders.

Disclosure: None.

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