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Why Wal-Mart Still Looks Attractive: Pro

Wal-Mart beat estimates by 3 cents but sales in the U.S. continued to struggle. However, John Lawrence, managing director-equity research at Morgan Keegan, still maintains his “outperform” rating on the big-box retailer.

“We think [Wal-Mart CEO] Bill Simon’s plan is showing progress, and although the leverage is only showing up in the SG&A side (Selling, General & Administrative Expense). Even with the down [comparable sales], these comps will reverse over the next six to eight months and that leverage can be pretty exciting,” Lawrence told CNBC.

Wal-Mart’s U.S. same-store sales fell 1.1 percent, in line with the company's forecast of a drop of 2 percent to flat and slightly better than the average 1.3 percent decline, according to estimates from Thomson Reuters.

Lawrence has had an “outperform” rating on the stock for almost three years.

"In the last few quarters—even with sales down—the leverage opportunities are very strong, and from either leveraging SG&A or gross margin they’ve been beating the estimates."

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CNBC Data Pages:

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CNBC Slideshows:

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Wal-Mart's Competitors:

Costco Target

BJ's

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Disclosures:

Lawrence does not own shares of WMT.

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