Have Wal-Mart Earnings Finally Turned a Corner?

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Wal-Mart Stores Inc. (NYSE: WMT) reported fourth-quarter and fiscal-year 2017 results before markets opened Tuesday. For the quarter, the retailing giant posted adjusted diluted earnings per share (EPS) of $1.30 on total revenues of $130.9 billion, including membership fees in Sam’s Club. In the same period a year ago, Wal-Mart reported EPS of $1.49 on revenues of $129.67 billion. Fourth-quarter results also compare to consensus estimates for EPS of $1.29 and $131.22 billion in revenue. Quarterly adjusted EPS benefited from a tax gain of $0.08 per share this year.

For the full year, Wal-Mart reported diluted EPS of $4.38 and revenues of $485.87 billion. For the prior year the company reported EPS of $4.59 and revenues of $482.13 billion. Analysts were looking for EPS of $4.32 and revenues of $485.75 billion. Full-year adjusted EPS totaled $4.32, which included a negative impact on the sale of Yihaodian, discontinued real estate projects and severance pay.

U.S. fourth-quarter same-store sales rose 1.8% at the company’s supercenter and discount stores. Same-store sales in the company’s Sam’s Club stores were up 2.4% excluding fuel and up 3.1% including fuel sales. Total U.S. net sales, including fuel, rose 2% for the quarter.

Higher fuel prices gave sales a boost this year, raising quarterly same-store sales by 1.9% and full-year sales by 1.3%, compared with a gain of 0.4% in the fourth quarter of last year and a 1% gain for the full 2016 fiscal year.

Consolidated operating income fell 6.6% year over year in the fourth quarter and 5.6% for the full fiscal year. U.S. declines were 2.5% for the quarter and 7.0% for the year, while the company’s international segment saw a quarterly decline of 8.9% but full-year gain of 7.7%. Operating income at Sam’s Club stores fell 8.5% in the quarter and 8.2% for the year.

Wal-Mart guided fiscal year 2018 EPS in a range of $4.20 to $4.40 and first-quarter EPS at $0.90 to $1.00. The company sees U.S. same-store sales rising 1.0% to 1.5% and Sam’s Club same-store sales rising about 1%, excluding fuel.

Consensus estimates call for first-quarter EPS of $0.96 and revenues of $117.81 billion. For the 2018 fiscal year analysts are looking for EPS of $4.33 and sales of $494.68 billion.

For the full year Wal-Mart returned $14.5 billion to shareholders in share buybacks and dividends.

Wal-Mart CEO Doug McMillon said:

We’re moving with speed to become more of a digital enterprise and better serve customers. We had a very solid fourth quarter with U.S. comp sales growth of 1.8 percent and U.S. e-commerce. GMV [gross merchandise value] growth of 36 percent. Our international business is consistently delivering solid sales growth in constant currency, and Sam’s Club posted its best comp sales growth of the year. I want to thank our talented associates for their work. We have more work to do, but I’m pleased with our progress.

Wal-Mart raised its quarterly dividend by $0.01 per share, payable to shareholders of record as of March 10, 2017.

Wal-Mart’s shares traded up about 3.2% in premarket trading Tuesday, at $71.65, in a 52-week range of $62.72 to $75.19. The consensus 12-month price target was $73.94 before the results were announced. The high target is $90.00.