Wal-Mart shares downgraded
by February 22, 2012 11:21 am 94 views
The first of the major brokerage houses have downgraded Wal-Mart Stores Inc. from a strong buy to a neutral position while trimming the expectations for the retail giant in the next six months.
Raymond James & Associates downgraded Walmart to a hold position following Tuesday’s missed earnings announcement.
Despite a healthy 5.9% spike in revenue Walmart was not able to convert the $123 billion fourth quarter sales into net profits. The company’s $5.16 billion net income, tumbled 14.7% from the year-ago period.
Butch Bugatch, analyst with Raymond James noted in the downgrade a disappointment in the company’s expense control in light of the ongoing margin compression.
He said Walmart has made it very clear the company is committed to selling “low prices” at its own expense in order to provide more value to its core customer base.
“We believe that operating margins are likely to be pressured in the coming quarters as a result of these issues,” he noted.
Walmart disclosed operating margins of 6.8% in the quarter, down 10 basis points from a year ago. Net margins of 4.2% were also tighter, down 100 basis points from the prior year.
Bugatch reduced his fiscal 2013 earnings estimate about 3% to $4.82 (the midpoint of
Walmart management’s $4.72 to $4.92 guidance range).
The bear sentiment is evident as investors continued to sell off Wal-Mart shares (NYSE:WMT) Wednesday morning following the downgrade. The stock was down about 2.55% trading at $58.55 mid-morning with very heavy volume. In the past 52 weeks the share price has ranged from a low $48.31 to a recent high $62.63.