BMO Capital Markets Reponse To Wal-Mart Stores, Inc. (WMT) Second Quarter Results

BMO Capital Remains Bearish On Wal-Mart stock, reiterates Underperform rating, cites weak EPS growth prospects.

On Tuesday, BMO Capital Market has cut its price target for Wal-Mart Stores, Inc. (WMT) analyst reported. The investment firm reiterates an Underperform rating on the company stock, while it has reviewed its stock price target and reduced it to $72 from $73. The stock lasts to trade lower followed by a weaker than expected quarterly financial results and a number of sell side revisions. The latest fall in stock price has taken the year to date drop to almost 21%.

Wayne Hood, an analyst at BMO Capital Markets’ dubs the Wal-Mart’s financial performance for the latest quarter of the current fiscal year (2QFY15), dissatisfaction. The company reported earnings of $1.08 per share, 13 cents less than the similar quarter last year. The investment company has predicted $1.12 in EPS, while the street estimate was around $1.13. The analysts cited low gross margin and mounted selling, general & administration expenses. Wal-Mart’s total and segment sales came in line with what the investment firm had predicted.

The margin weights for the company are expected to continue in the upcoming period. This has caused the company’s management to cut its EPS guidance for the complete fiscal year. Wal-Mart now expects the full year EPS in $4.40 to $4.70 range compared to previous expectation of EPS in $4.70 to $5.05 range.

Comps for the United States were positive for the period at 1.5%, determined by 1.3% growth in traffic. However, inventory shrinkage and reimbursement pressures result in to a drop in the U.S. margins on EBIT. This trend is most likely to continue next year, as well. The weakness in global segment will be another reason of concern for the company.

BMO Capital reiterates its Underperform rating depending on weak forecasts for earnings per share growth. The price target of $71 is generated on a multiple of 15 times smeared to the 2016 EPS estimate of $4.86.

The Street looks Neutral on Wal-Mart stock. Almost 34 analysts covered the stock, out of which 21 rate it Hold, 9 gave it a Buy, while 4 recommend a Sell. The consensus stock price target stands at $75.56 and specified a return potential of approximately 9% against latest stock price.

Credit Suisse analyst, Michael B Exstein holds the most bullish viewpoint with $85 price target and a rating of Outperform. The most bearish price target of $61 was given by Wolfe Research analyst, Scott A Mushkin with Underperform rating.