http://www.zacks.com/
CHICAGO--(BUSINESS WIRE)--
Zacks.com Analyst Blog features: Wal-Mart Stores Inc. (NYSE: WMT),
The Home Depot Inc. (NYSE: HD),
Lowe's Companies Inc. (NYSE: LOW),
Freeport McMoRan (NYSE: FCX)
and Peabody Energy (NYSE: BTU).
Get the most recent insight from Zacks Equity Research with the free
Profit from the Pros newsletter: http://at.zacks.com/?id=4579
Here are highlights from Tuesday's Analyst Blog:
Wal-Mart Reports In Line, Ups Outlook
Wal-Mart Stores Inc. (NYSE: WMT)
reported better-than-expected third-quarter 2011 results and raised its
EPS outlook for the rest of fiscal 2011. The retailing giant reported
quarterly earnings of 95 cents a share, reflecting a 15.8% increase over
the prior-year earnings of 82 cents a share.
However, (excluding the benefit of one-time items) earnings were in line
with the Zacks Consensus estimate of 90 cents per share.
Management raised its full year 2011 EPS guidance to a range of $4.08 to
$4.12 per share. The previous guidance was between the range of $3.95 to
$4.05. For the fourth quarter, the company expects earnings in the range
of $1.29 to $1.33 per share. The Zacks Consensus Estimate for the year
and the fourth quarter are $4.02 and $1.28, respectively.
Revenue Details
Wal-Mart's net sales recorded a growth of 2.6% to $101.2 billion from
$98.7 billion in the year-ago quarter. The expansion was primarily
driven by a robust 9.3% expansion in the International segment, which
benefited from favorable currency translations, coupled with a 2.7%
growth in the Sam's Club segment. However, sales at the Wal-Mart's U.S.
segment were almost flat year-over-year, declining marginally by 0.1%.
Net sales were below the Zacks Consensus Estimate of $102.5 billion.
Wal-Mart, widely regarded as a bellwether for the U.S. economy, stated
that U.S. same-store sales decreased 1.3% year-over-year, while that for
Sam's Club grew by 2.4%.
Meanwhile, quarterly operating income grew by 3.1% year-over-year to
$5.6 billion, while the operating margin increased marginally by 3 basis
points to 5.5%. The growth was primarily caused by favorable foreign
currency translations.
Wal-Mart added almost 10 million square feet of retail space during the
reported quarter, with 37% of the square footage growth in Wal-Mart
International.
Balance Sheet and Cash Flow
For the third quarter of fiscal 2011, Wal-Mart generated free cash flow
of $2.9 billion, a decline of 19.4% from $3.6 billion in the year-ago
period due to higher inventory costs. However, the company benefited
from a Return on Investment (ROI) of 18.6% during the quarter compared
to 18.4% in the prior year period. The company has a
debt-to-capitalization ratio of 38.4%.
Home Depot Earnings, Outlook Up
The Home Depot Inc. (NYSE: HD)
posted third-quarter 2010 earnings of 51 cents per share, beating the
Zacks Consensus Estimate of 48 cents. Results also surpassed 41 cents
reported in the year-ago period. Net income was $834 million, up 21%
from $689 million in the prior-year quarter.
Higher revenue coupled with lower expenses aided Home Depot to
deliver solid results in the quarter.
Store Update
Home Depot currently operates 2,244 retail stores, including 1,976 Home
Depot stores in the United States, 179 stores in Canada, 80 stores in
Mexico and 9 stores in China.
Full-Year 2010 Guidance
Home Depot expects sales to increase 2.2%. Earnings are expected to
increase 25% to $1.94 per share.
Peer Comparison
Lowe's Companies Inc. (NYSE: LOW),
which competes with Home Depot, reported earnings of 31 cents, up 35%
year-over-year from 23 cents in the year-ago period. Sales in the third
quarter increased 1.9% year-over-year to total $11.6 billion. Comparable
store sales increased 0.2% in the quarter.
We maintain our long-term "Neutral" recommendation on Home Depot. The
quantitative Zacks #3 Rank (short term Hold rating) for the company
indicates no clear directional pressure on the stock over the near term.
Industrial Production Unchanged
Factories
Factory utilization rose to 72.7% from 72.3% in September (revised up
from 72.2%) and 72.2% in August. That is up from 68.2% a year ago, and
the cycle (and record) low of 65.4%. That is still well below the
long-term average level of 79.2%, so as with total capacity, we still
have a long way to go on the factory utilization level.
The increase in utilization over the last year, both total and factory,
has been aided by a decline in capacity, with the total falling 0.4% and
factory capacity dropping 0.3%. If some factories are closed and
dismantled, it is easier to run the remaining ones closer to full time.
Mines
Mines were working at 87.9% of capacity in October, down from 88.0% in
September and August. A year ago they were only operating at 81.8% and
the cycle low was 79.6%. We are actually now above the long term average
of 87.4% of capacity.
Since there is a lot of operating leverage in most mining companies,
this probably means very good things for the profitability of mining
firms with big U.S. operations like Freeport McMoRan (NYSE: FCX)
and Peabody Energy (NYSE: BTU).
Mine capacity was unchanged year over year.
Utilities
Utility utilization dropped to 76.6% from 79.4% in September and 81.3%
in August. This is lower than it ever got during the official portion of
the Great Recession, when the cycle low was 77.6%. We are far below the
long-term average utilization of 86.7%.
The decline was probably more a function of the weather than a change in
economic activity, while the year-over-year increase is probably more
reflective of a better economy. Increasing utility utilization faces a
headwind because, unlike factories, our power plant capacity has
actually been increasing significantly, up 1.6% year over year.
The drop in utility utilization is a significant distorting factor in
the overall figures for both utilization and production figures. In
assessing the state of the overall economy, it is better to just look at
the manufacturing numbers.
Want more from Zacks Equity Research? Subscribe to the free Profit from
the Pros newsletter: http://at.zacks.com/?id=5514.
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative
analysis to help investors know what stocks to buy and which to sell for
the long-term.
Continuous coverage is provided for a universe of 1,150 publicly traded
stocks. Our analysts are organized by industry which gives them keen
insights to developments that affect company profits and stock
performance. Recommendations and target prices are six-month time
horizons.
Zacks "Profit from the Pros" e-mail newsletter provides highlights of
the latest analysis from Zacks Equity Research. Subscribe to this free
newsletter today: http://at.zacks.com/?id=5516
About Zacks
Zacks.com is a property of Zacks Investment Research, Inc., which was
formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he
could find patterns in stock market data that would lead to superior
investment results. Amongst his many accomplishments was the formation
of his proprietary stock picking system; the Zacks Rank, which continues
to outperform the market by nearly a 3 to 1 margin. The best way to
unlock the profitable stock recommendations and market insights of Zacks
Investment Research is through our free daily email newsletter; Profit
from the Pros. In short, it's your steady flow of Profitable ideas
GUARANTEED to be worth your time! Register for your free subscription to
Profit from the Pros at http://at.zacks.com/?id=4580.
Visit http://www.zacks.com/performance
for information about the performance numbers displayed in this press
release.
Follow us on Twitter: http://twitter.com/ZacksResearch
Join us on Facebook: http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts
Disclaimer: Past performance does not guarantee future results.
Investors should always research companies and securities before making
any investments. Nothing herein should be construed as an offer or
solicitation to buy or sell any security.
Source: Zacks.com