NEW YORK ( TheStreet) -- On April 2, when we last discussed retail giant Wal-Mart (WMT - Get Report), I made a case for why I thought the stock was undervalued despite the stock (at the time) posting 12% gains.In that article, while comparing the relative performances of rivals Costco (COST) and Target (TGT), I said:
"For now, from an investment perspective, the stock is still trading at an attractive valuation. When compared to Costco and Target, which are both trading at higher P/E ratios, a case can be made that Wal-Mart is undervalued by at least 10%. With continued operational improvements and a recovering economy, patient investors should expect shares to approach the lower $80s by the second half of the year."
International operations posted 2.9% revenue growth, which nearly doubled in constant currency. "Comps," which is another way to say "same-store sales" -- the metric that tracks revenue results of stores that have been opened at least one year, declined in the U.S. by 1.4%. Here again, this could be a macro issue and not necessarily reflective of poor performance by management. Bears might disagree. However, I'm willing to excuse Wal-Mart here because even strong brands like McDonald's (MCD) posted a 1% decline in U.S. comps. I don't think anyone is ready to say that McDonald's long-term outlook is on the decline. Even with Wal-Mart's 2% decline in store traffic, the company still reported diluted earnings per share of $1.14, up close to 5% year over year. What this means is that management is doing a great job navigating this rough patch - helped (in part) by an aggressive cost control, which helped stabilize operating margin, while yielding a 1% improvement in operating income.