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Wal-Mart Earnings Preview: Recession Blues? Probably Not Here

WAL-MART (WMT)

Largest retailer anywhere. Revolutionized the concept of good products for great, low prices. Sells everything from electronics to music downloads to groceries and gas. Dow component.

Reports Q1 2009 (yes, 2009) earnings Tuesday 5/13 at approx. 615a-630a ET. Wal-Mart's conference call is pre-recorded and will be made available shortly after the earnings release hits the wires. An exact time for the call has not been announced, but you can dial into it at 203-369-1090. Call that number now and you'll get a countdown pointing to a "new event" at 7a ET.

Wal-Mart
Wal-Mart

WHAT WILL MOVE THE STOCK:

IF ONLY ALL COMPANIES GAVE THIS MUCH GUIDANCE - Lots of transparency on sales figures here. Wal-Mart gives regular updates of quarterly sales growth expectations on top of the monthly sales figures released by all major retailers. On May 8, Wal-Mart gave Q1 revenue guidance of "about $94 billion" -- above analysts' consensus. On April 10, Wal-Mart said it expected Q1 earnings to come in between $0.74 and $0.76 a share. BUT since 4/10, Wal-Mart put out better-than-expected April sales figures. (See Estimates below for current numbers)

WHAT ELSE DO WE WATCH? - Are consumers still spending? What are they buying? Are sales rising for high-margin products like TVs and other electronics or low-margin goods like groceries and gas? Also look at the geographical break-down of Wal-Mart's growth. The retail giant said its international net sales shot up 18.9% in April -- more than double the rate for the entire company. How big a boost are Wal-Mart's overseas profits getting from the weaker dollar? At the same time, is the weaker dollar biting into margins on U.S. sales as the cost of imported goods rises?

ARGUMENT FOR UPSIDE SURPRISE - Since May 8th, 40% of the analysts tracking Wal-Mart have updated their estimates. All of them hiked their numbers to 76 cents or more -- at least a penny above the current consensus. Starmine.com sees clusters of upgrades like these as very important. The herd of estimate increases is one reason why Starmine's own SmartEstimate calls for Wal-Mart to earn 76.4 cents. Hey, a cent or a cent and a half doesn't sound like a lot, but when you've got nearly four BILLION shares outstanding, them pennies add up mighty quickly.

THE OUTLOOK - As with any company, the current numbers are just a part of the story. Pay close attention to Wal-Mart's Q2 forecasts. Better (or worse)-than-expected guidance can easily trump bad (or good) results for the current quarter.

ESTIMATES:

Q1 '09 EPS up 11% to $0.75, revenues up 8% to $93.223 billion

Q2 EPS up 13% to $0.81, revenues up 7% to $99.805 billion

FY 09 EPS up 10% to $3.45, revenues up 7% to $406.490 billion

Source: Thomson Reuters

Starmine predicts Q1 EPS of $0.764 and Q2 EPS of $0.825 based on its weighting of analysts based on previous accuracy and other factors.

Starmine also expects $93.117 billion in Q1 revenues and $99.776 billion in Q2 revenues.

Year-ago actuals: Q1 EPS $0.68, Rev. $86.410 billion

*All estimates are current as of 5/12 and subject to change.*

FACTOIDS:

NOT THE CHART OF A COMPANY WORRIED ABOUT RECESSION - Go ahead, look at Wal-Mart's stock chart again . The stock closed at $42.27 on 9/10/07. Since then, it's shot up thirty seven percent. Since the beginning of the year, Wal-Mart is up 22% (from $47.53). The charts of competitors like Target (up 7% this year) and Costco (up 5%) are downright frumpy by comparison.