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TheStreet Open House

Wal-Mart (WMT) Earnings: Wall Street's Take

NEW YORK (TheStreet) -- The world's largest retailer Wal-Mart (WMT) slipped again on Friday after issuing weak 2015 guidance and delivering subpar fourth-quarter comparable sales on Thursday.

Indicative of the tough retail environment, management issued lower-than-expected full-year earnings between $5.10 and $5.45 a share. Analysts surveyed by Thomson Reuters had estimated net income of $5.54 a share over fiscal 2014.

The company expects net sales to grow at the low-end of a 3% to 5% forecast.

In the three months ended in January, the Bentonville, Ark.-based business saw comparable store sales drop 0.4%, a result attributed to a series of winter storms and the reduction to the Supplemental Nutrition Assistance Program (SNAP), the government's food-stamp benefits.

In response to sluggish traffic, MKM Partners reiterated its "neutral" rating and $76 price target.

"Extreme winter weather has had some impact, but we believe other factors, most of which show no signs of abating, also contributed to the weak performance. The 11/1/13 cuts in SNAP assistance had a 40 basis-point bigger impact than had been anticipated, and contributed to a low-single-digit drop in grocery comps. We believe Walmart captures 18%, or $14 billion, of total SNAP spending and expect the cuts to remain a headwind until they are cycled next fall," wrote MKM managing director Patrick McKeever in a report.

Over fiscal 2014, McKeever anticipates a slight increase in same-store sales, but lowered full-year EPS to $5.26 from $5.60, reflecting a lower gross margin assumption. In the first quarter ending April, the firm expects flat comps and earnings of $1.15 a share.

BMO Capital Markets reiterated the retailer as "market perform," but cut its target price to $79 from $81. Analyst Wayne Hood reduced fiscal 2014 EPS to $5.30 from $5.44 and fiscal 2015 EPS to $5.85 from $6.03.

On lower comps, Hood said, "The rate of the decline in traffic accelerated from 3Q13 (down 0.4%) and was disappointing to us given the magnitude of impressions and promotions that were underway in the 4Q13. 1Q14 US Walmart comp-store sales are expected to be about flat with last year's 1.4% decline implying a sequential deterioration from 4Q13 in the two-year rate from a 0.6% increase to a 1.4% decline."

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