Everyone knows Walmart (WMT) for its “Everyday Low Prices,” but the retailer revealed yesterday that it is putting this motto to work in the health insurance business. That’s right — Walmart is working with a health insurance comparison service to offer its services in its stores.
Walmart has been struggling of late, but will this development — and Walmart’s next earnings announcement — be enough to help the blue and yellow retail giant make a comeback?
Company Overview
Even though it started as a mom-and-pop operation in 1962, Walmart has since grown into the largest public corporation by revenue. Although Walmart is best known for its main brand name, Walmart is actually responsible for 71 brands of discount department stores across 27 countries.
Walmart has the largest private workforce in the world; it employs over 2.2 million individuals across more than 11,000 locations worldwide.
WMT stock currently pays a 2.5% dividend ( it goes ex-dividend at the beginning of December), but as I’ll discuss shortly a generous dividend doesn’t guarantee a buy recommendation from me.
Earnings Preview
Walmart is expected to report its third-quarter operating results around November 13. Currently the analyst community is looking for $1.13 earnings per share on $118.53 billion in revenue. Compared with Q3 2013, this translates to a 1% drop in earnings and 2.5% sales growths while the industry as a whole is expected to post 33.3% year-on-year earnings growth for the quarter.
Even worse, the consensus earnings-per-share estimate has fallen by 5 cents, or 4.2%, over the past 90 days. Falling analyst estimates tend to precede earnings misses. So, Walmart will likely once again underperform expectations for the third quarter.
Current Ratings
The past year has been rough for WMT stock — it has spent 10 of the past 12 months at a “sell.” Institutional buying pressure for WMT has eroded — as shown by its “C-rated” Quantitative Grade. This is very important because it suggests that WMT has a mediocre risk-to-return ratio.
On the fundamentals side, Walmart has ample room for improvement. Currently, Walmart receives “C-” and “D-ratings” for seven of the eight metrics I graded it on, including sales growth (D) and earnings growth (C). The sole exception is Walmart’s “A-rated” return on equity. So, WMT receives a “C” for its Fundamental Grade.
I consider WMT a “C-rated hold.” Unless WMT posts blowout earnings for the third quarter, I don’t expect this to change anytime soon.
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Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
