Wall Street expects Wal-Mart annual revenue to top $487 billion, net income to decline

Wal-Mart Stores has been mum thus far on the recent holiday season and analysts expect the retail giant did well given that it’s also a grocery store. But full year net income is likely to fall below that of the previous year.

Wal-Mart will report fourth quarter and fiscal year earnings on Tuesday (Feb. 21) before the market opens. Wall Street consensus is $1.29 in net income per share for the quarter ending Jan. 31, 20 cent below the $1.49 earned a year ago. For the full year the consensus estimate is $4.32, below the $4.59 per share added to the company coffers last year.

Ben Bienvenue, analyst with Little Rock-based Stephens Inc., said his estimate is slightly below the street at $1.26 for the quarter and $4.28 for the year. He expects more of the same from Wal-Mart with slightly improved comparable store sales. He also believes gross margins will be hurt by deflationary food prices.

“Wal-Mart has already telegraphed its earnings predictions for this year and we look for them to deliver as stated while they continue to invest heavily in e-commerce, a move we see necessary for future growth,” he said. (Stephens Inc. conducts investment banking services with Wal-Mart Stores and is compensated accordingly.)

The majority of analysts covering Wal-Mart Stores have the stock rated a hold as the retail giant’s continues to forgo earnings growth in favor of heavy investment in its e-commerce division. To help balance that effort the retailer continues to pay a healthy dividend and repurchase shares.

About a third of analysts continue to rate Wal-Mart shares as a buy with a target price of $74.25. Two firms reiterated their neutral rating on the shares in the quarter, Wells Fargo and Bernstein while Susquehanna rerated Wal-Mart a positive buy.

Following Wal-Mart’s analyst meeting in October, Raymond James analyst Budd Bugatch trimmed his bullish earnings predictions for the year ending Jan. 31. His estimate for the fourth quarter is $1.30, but he reduced the full year guidance slightly to $4.44. For this coming year he pegged earnings at $4.33, with the first and third quarters being the weakest at 95 cents.

Wal-Mart CFO Brett Biggs said in October the retailer was shaving its guidance for this year (fiscal 2018), a departure from an upward forecast made the prior year. The reasons cited were near term operating losses related to the Jet.com purchase and currency-related losses. Management has forecast earnings growth of roughly 5% for next year, lower than the 5%-10% range forecast in October 2015.

Analysts expect Wal-Mart’s consolidated and U.S. segments to have lower operating income this year with margins also dipping from the retailer’s ongoing investments in prices. Cash flow for the year is expected to be around $80 billion as management has predicted.

Comp sales at Walmart U.S. including fuel are expected to increase 1.8% in the recent quarter, which would be a marked improvement from 0.3% in the year-ago quarter. For the full year ending Jan. 31, comp sales for the U.S. segment are expected at 1.8%, compared to 1% year-over-year.

Sam’s Club comp sales are expected to be up 1.7% for the quarter, reversing the negative 3.2% reported a year ago. For the full year comp sales are expected to be flat, an improvement from 3.2% decline year-over-year.

For fiscal 2017 Wal-Mart Stores sales revenue is expected to top $483 billion, up from $479 billion a year ago. Membership income should take the consolidated revenue to $487 billion for the year.

Walmart U.S. sales are expected to be $308 billion, up 3.35% year-over-year and within the predictions of Walmart U.S. CEO Greg Foran.

Walmart International sales are expected at $181 billion, up 47% year-over-year. Walmart International CEO David Cheesewright has said the strength in Walmart’s largest foreign market – Mexico – and growth in Canada, China and Central America should help fuel growth. The retailer continues to revamp operations in the United Kingdom and Japan.

Wall Street is no doubt eager to get an update on the recent acquisitions of ShoeBuy and Moosejaw for a combined cost of $121 million. In the past week Wal-Mart has also increased its stake in Chinese e-commerce giant JD.com to 12.1%, worth roughly $4.87 billion. This is up from the 10.8% stake it had in October, and its 5.9% stake in June of last year.

Shares of Wal-Mart Stores (NYSE: WMT) have in the past 52 weeks ranged in price betweeen $75.19 and $62.35. During the past year the share price has risen about 3.9% compared to a 25% gain of the Dow Jones Industrial benchmark.