The question here is, how much of Wal-Mart's first-quarter results should be blamed on recent macro events such as the 2% increase in the Social Security payroll tax rolled out at the beginning of the year? Not to mention there was the delay in income tax refunds; the company warned back in January that its earnings results may be adversely affected.
These two events point to one thing: consumer spending, which always matters to Wal-Mart. While the 2% decline in store traffic is discouraging, investors realize that "this is Wal-Mart." What I mean is, we've been here before and the company has overcome much worse. The fact is people aren't going to suddenly stop shopping for food and household goods. Not many stores can compete with Wal-Mart on pricing and convenience.
For that matter, management said Wal-Mart was able to gain market share in categories like food, consumable and health and wellness products. This is the second consecutive quarter in which Wal-Mart has done so.
Management also expects modest improvements going forward as earnings-per-share guidance for the second-quarter expected to come in the range of $1.22 to $1.27, which represents year-over-year growth of 3% to 7%.
Macro concerns can weigh heavily on Wal-Mart, which would then impact upon the stock. But given the company's immense size, which serves as protection, the shares are not going to sway that drastically from one quarter to the next. Besides, Wal-Mart doesn't always get the credit it deserves for operating one of the most efficient businesses in the world.
The fact that shares are trading at just 13 times fiscal 2014 EPS estimates, which is almost two points below the industry P/E average, presents not great but decent value. The stock's 16% year-to-date gains notwithstanding, over the course of the next six to 12 months, investors should expect additional gains of 5% to 7%.
At the time of publication the author had no position in any of the stocks mentioned.
This article was written by an independent contributor, separate from TheStreet's regular news coverage.