Wal-Mart Stores (NYSE:WMT) announced its results for the third quarter on November 15, 2012. Wal-Mart Stores operates Walmart discount stores, supercenters, Neighborhood Markets and Sam's Club locations in the United States.

In most situations, when earnings do not meet analyst estimates, a business' stock price will tend to drop. On the other hand, when actual earnings beat estimates by a significant amount, the share price will likely surge. SEE: Earnings: Quality Means Everything

The Numbers: Wal-Mart Stores' revenues topped expectations, though the company's EPS fell short of predictions. The company reported $1.08 per share versus the $1.17 per share estimate and revenues of $113.93 billion versus the $110.5 billion estimate. EPS rose 12.5% while revenue climbed 3.4% from the same period last year. Wal-Mart Stores' revenue has grown during each of the past four quarters on a year-over-year basis. Wal-Mart Stores' net income for the third quarter was $3.63 billion. According to the reported number, this is up 9% from last year's figures. Last quarter marked the third in a row of rising net income.

Management Quote: "We're very pleased with our financial performance for the third quarter and the dedication and hard work of our associates serving Walmart customers and communities around the world," said Mike Duke, Wal-Mart Stores, Inc. president and chief executive officer. "Earnings per share were $1.08, which represents an 11.3 percent increase over the third quarter last year."

A Look Back: Last quarter marked the fifth straight quarter that the company saw shrinking gross margins, as gross margin fell 0.1 percentage point to 24.9% from the year-earlier quarter. Over that time, margins have contracted on average 0.3 percentage point per quarter on a year-over-year basis.

Net income has increased 1.4% year-over-year on average across the last five quarters. The biggest gain came in the first quarter, when income climbed 10.1% from the year-earlier quarter.

Looking Ahead: When earnings estimates stay consistent leading up to earnings season, this usually shows analysts accurately predicted earnings estimates and business is stable. Be cautious though as this may also be a warnings sign that earnings could come at a huge surprise to the upside or downside as analyst did not correctly predict earnings. Steady earnings estimates mean there is not enough change going on with the company to make analysts change their opinions. When earning estimates are steady, investors can look at the revenue trend for a more fundamental indicator. For the fiscal year, the average estimate has moved up from $4.85 a share to $4.90 over the last ninety days.

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Tickers in this Article: WMT

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