Cautious Retail Investors Await The Q4 Report Of Industry Titan Wal-Mart

Retail industry bellwether Wal-Mart Stores Inc (NYSE: WMT) will report its fourth-quarter results on February 21 amid a slew of disappointing holiday sales updates from its peers. Cautious retail investors would look at how far the choppy industrial backdrop has impacted the world's largest retailer.

“While we think WMT fared better than most (improved customer experience/service, incremental price investments), we are trimming our U.S. comp to +0.8 percent E (Sam's remains at +1.2 percent E),” Baird analyst Peter Benedict wrote in a note.

Expectations: Company And Analyst Weigh In

That said, Benedict expects relatively an in-line EPS as his $1.27 estimate compares to the Street's $1.29 and guidance of $1.18–$1.33.

Though bears are watching the impact on traffic from higher gas prices, the analyst said the company would benefit from moderating food deflation.

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The analyst sees accelerating growth in Wal-Mart’s e-commerce platform across 2H16 and beyond, given investments in Jet.com, marketplace and online grocery.

Benedict also pointed out that Wal-Mart’s move to free two-day shipping ($35 threshold, down from $50) is a compelling offer that underscores its commitment to address/elevate its convenience proposition.

Meanwhile, Wal-Mart projects flat EPS for FY 2017. The analyst believes the Street's total sales estimate of +1.9 percent (vs. FY 2016's 3 percent) seems to set an appropriate/achievable bar.

“While operating profit will remain under pressure near term, the pace of decline is expected to moderate this year,” Benedict continued.

Outperform Rating, Justification

As such, Benedict reiterated its Outperform rating and $80 price target on the shares, citing the company’s defensive positioning within a choppy consumer/retail backdrop.

“We continue to believe CEO Doug McMillon's bold strategy of transforming WMT into a durable, fully integrated omni-channel retailer is the right one for the business and investors,” Benedict added.

At last check, shares of Wal-Mart were down 0.31 percent to $68.45.