North America

Earnings Preview: Wal-Mart Q4 2017 (WMT)

By: Craig Bowles


Wal-Mart Stores, Inc. (WMT) is slated to report 4Q 2017 (fiscal year) earnings before the bell on Tuesday, February 21st. The earnings release is expected at approximately 7:00 a.m. ET with a pre-recorded call available at Wal-Mart Investor Relations. Results from the world’s largest retailer and constituent of the Dow Jones Industrial Average tend to heavily influence the direction of the equity index futures.


Outliers & Strategy

Key measures:

  • Earnings Per Share (EPS) from Continuing Operations: This value for this measure is most often the figure that compares with consensus estimates. Adjusted Earnings Per Share (EPS) is often available for 4Q and that becomes the comparable value. The Street estimate is $1.29 (range $1.23 to $1.36). (Source: Yahoo! Finance) Consensus was $1.33 three months ago.
  • Revenues: Analysts expect an increase of 1.3% y/y to $131.38 bln (range $130.27 bln to $133.53 bln). (Currency headwinds that reduced much of the FY2017 y/y growth remained in Q4.)
  • Comparable Store Sales: Guidance is 1.0% to 1.5%.
  • Earnings Per Share (EPS) Guidance for 4Q2017: The current Street estimate is $1.33 (range $1.26 to $1.38).
  • Earnings Per Share (EPS) Guidance for FY2018: On October 6th, the company expected GAAP EPS to be relatively flat to fiscal year 2017 adjusted EPS which is expected in the $4.15 to $4.35 range.
  • Adjusted Earnings Per Share (EPS) Guidance for FY2018: The Street estimate is $4.34 (range $4.11 to $4.62).
  • Wal-Mart’s trailing P/E of 14.9 compares to a five-year average of 15.0; Price/Book is 2.7 versus a five-year average of 3.1; Price/Sales 0.4 versus a five-year average of 0.5. Price/Cash Flow 6.7 versus a five-year average of 9.0. Dividend yield of 2.9% compares to a 5-year average of 2.6%.
  • Analysts view Wal-Mart with 9 Buy, 20 Hold, and 4 Sell ratings. (source:
  • Insiders sold 11,197,199 shares the last three months and sold a net 73,945,960 shares in the past year. (source: (Insider selling has been the norm since Sam Walton’s shares were distributed.) October 2015’s $20 bln in stock buybacks over the following 2 years was a reduction after $15 bln on June 2013 and again October 2014.
  • Wal-Mart results could also impact retailers, such as Target (TGT) –which reports the prior day– and Costco (COST).
  • Wal-Mart shares have a 1-day average price change on earnings of 4.01%. Options are pricing in an implied move of 2.88% off earnings.

Recent News

  • 02/15: Walmart Stores paid $51 million for specialty online retailer Moosejaw, according to a post on
  • 02/07: Walmart announced that it had increased its stake in Chinese e-commerce giant to 12.1%, worth roughly $4.87 billion, according to a post on
  • 01/26: Wells Fargo Securities resumed coverage of Wal-Mart Stores with a Market Perform rating citing early stages of a multiyear reinvestment cycle focusing on store upgrades, sharper pricing, and improved e-commerce relevance, according to a post on Barron’
  • 01/23: Morningstar downgraded Wal-Mart Stores to double-A-minus from double-A and kept a negative outlook while citing eroding profit margins and increasing competitive pressure, according to a post on Barron’
  • 01/23: Morgan Stanley believes Wal-Mart’s valuation spread to key peer groups is unsustainable and the company probably won’t get the same boost in 2017 from a weakening dollar, improvement in the lower end consumer, and declining gas prices, according to a post on Barron’
  • 11/17: Wal-Mart Stores beat earnings forecasts and raised its fiscal 2017 guidance but the stock fell nearly 4%, according to a post on Barron’

Technical Review

Wal-Mart shares made an all-time high in January 2015 at $90.97 and yet managed to earn the “Dog of the Dow” title by year-end. A 50% bounce took the stock back up to $74.66 in the summer of 2016 and the stock has trended lower since. Competitor Target has trended lower similarly since the summer of 2015. Point and figure technicians have a bearish price objective of $60. (Chart courtesy of



With the economic expansion nearly eight years old, retail and other cyclical industries would normally be expected to struggle amid late-cycle pressures from inflation and debt. Walmart’s online efforts continue and would seem to have nice potential. Over the past four quarters, the company has beaten analyst consensus by an average of 5c. Estimize consensus for an EPS (often adjusted in Q4) of $1.32 on revenue of $130.779 bln compares to analyst consensus of $1.29 on revenue of $131.38 bln. Guidance is factored into the stock’s reaction.


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