Wal-Mart Stock Ticked Lower on Lukewarm Earnings

Shares of Wal-Mart edged lower during Thursday trading after the company’s Q3 fiscal 2017 results failed to inspire confidence among investors.

Before the bell on Thursday, Wal-Mart released its third quarter results for financial year 2017, and despite delivering an earnings beat, its stock ticked lower as other metrics disappointed investors.

The world’s largest retailer reported Q3 fiscal 2017 earnings of $0.98 per share, beating Wall Street estimates of earnings of $0.96 per share. Revenue for the quarter rose 0.7% to come in at $118.2 billion, but missed analyst expectations of $118.8 billion.

 

The company also improved on its full year outlook as it now expects to earn $4.20 to $4.35 per share, up from the previous guidance of $4.15 to $4.35.

Revenue Miss

The company cited forex headwinds, depreciation of food prices and unseasonably warm weather as factors that clipped its revenue growth. Comparable food sales fell 1.5%, more than the 1% decline posted last quarter. But there were other concerns for investors. Same store sales increased 1.2%, lower than last quarter’s 1.7% increase. This broke Wal-Mart’s streak of consistent same store sales growth that stretched eight consecutive quarters. Neighborhood store sales growth also slowed to 5.2 percent, after posting a growth of 6.5% last quarter.

Jet.com

With store sales slowing down, the saving grace for Wal-Mart now increasingly looks to be Jet.com. Wal-Mart acquired the e-commerce company early this year, and the timing could not have been better. The company’s e-commerce business had been shrinking in recent years, but in Q3 fiscal 2017, digital sales rose 20.6 percent. Wal-Mart has in recent years been investing heavily in technology and the acquisition of Jet.com finally looks like it will help the company bridge the wide gap between itself and Amazon, whose US online sales are estimated at about six times that of Wal-Mart.com’s.

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Stock Performance

Following the release of the earnings report on Thursday, Wal-Mart shares drifted lower to close the day at $69.19, 3.08% lower. Wal-Mart has been one of the consistent performers of the year, trending higher, albeit gradually, for most of 2016. Year to date, it is up 12.87% and despite the slight dip on Thursday, Wal-Mart remains one of the most attractive stocks to investors.

There is plenty of confidence in the stock because Wal-Mart is the largest retailer in the world and we are heading into the festive season, a period characterized by higher consumer spending. The company also has an impressive 41-year track record of increasing its dividends, and its directors review its payout every December. The current dividend yields stand at a juicy 2.89% and with Wal-Mart stock trading at a price to earnings ratio of 14.87, investors can look forward to a little cheer as the holiday season kicks in.

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