Will Walmart (WMT) Stock be Affected Today by Minimum Wage Hikes at Hundreds of Stores?

NEW YORK (TheStreet) -- Shares of Walmart Stores  (WMT) are flat at $86.69 in pre-market trading after it was reported that minimum wage increases across the U.S. will prompt the largest private employer in the country with 1.3 million workers, to adjust base salaries at 1,434 stores, impacting about a third of its U.S. locations, according to an internal memo reviewed by Reuters.

The memo, which was sent to store managers earlier this month, offers insight into the impact of minimum wage hikes in 21 states due to come into effect on or around Jan. 1, 2015.

These are adjustments that Walmart and other employers have to make each year, but growing attention to the issue has expanded the scope of the change. Thirteen U.S. states lifted the minimum wage in 2014, up from 10 in 2013 and 8 in 2012, Reuters said.

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For Walmart, minimum wage legislation is not a small thing. Its operating model is built on keeping costs under close control as it attracts consumers with low prices and operates on tight margins. In recent years, it has been struggling to grow sales after many lower-income Americans lost jobs or income in the financial crisis, Reuters noted.

TheStreet Ratings team rates WAL-MART STORES INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate WAL-MART STORES INC (WMT) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in stock price during the past year, good cash flow from operations, growth in earnings per share and reasonable valuation levels. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • WMT's revenue growth has slightly outpaced the industry average of 1.2%. Since the same quarter one year prior, revenues slightly increased by 2.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • Net operating cash flow has significantly increased by 72.54% to $3,570.00 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 46.64%.
  • WAL-MART STORES INC reported flat earnings per share in the most recent quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, WAL-MART STORES INC reported lower earnings of $4.86 versus $5.01 in the prior year. This year, the market expects an improvement in earnings ($5.00 versus $4.86).
  • You can view the full analysis from the report here: WMT Ratings Report
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