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Six Reasons Wal-Mart Could Beat Estimates


Expect the behemoth to keep its momentum going.

The US stock market has been on a major tear, as most of you reading this know. But will the break-neck momentum we've seen almost across the board continue? This week could be pivotal, and one news item that could have an impact is Wal-Mart's (WMT) second-quarter release, which is expected to come out on August 13.

Here's my latest take on the Arkansas-based retail giant:

I must admit I have an almost stalker-like obsession with Wal-Mart. If the economic recovery stalls, more people will be drawn to discounters like it. But even if the recovery turns out to be a bit more on the robust side, resembling a U- or V-shape, I believe that consumers will have a set of dinosaur arms when it comes to many food and leisure items: I see them being reluctant to dip into their wallets -- a definite benefit for the company.

2. The stock trades in the upper $40s right now, which is pretty much where insiders had been buying the stock in the March and May time frames. There's no guarantee it's going to end up making any type of coin, but having the opportunity to buy at around the same price is kind of intriguing.

3. In the last 4 quarters, it's beat out the estimate 3 times. Management knows this gig, and I believe the company will at least meet -- but probably beat -- the estimate in the quarter that's going to be announced. The estimate I'm seeing is $0.86.

4. Nobody really talks about it that much -- and I'm not inclined to belly up to the stock just because of it -- but the dividend is worth a double-take. That forward yield is about 2.2% right now, which is a nice sweetener to this deal.

5. Don't forget about the $15 billion share buyback program. That's something its board would likely not have considered unless it felt pretty upbeat about the company's chances.

6. At 13.8 times this year's estimate, it's not super cheap. But it's not out of the ballpark either. Remember that Target (TGT) presently trades at a little north of 14.7 times this year's analyst estimate. And some of the department stores are trading at wildly high multiples of expected earnings. Take JC Penney (JCP): The chain currently trades at 38.3 times this year's estimate. Or look at Macy's (M), which is presently at 20.6 times the current year's estimate.

As I said, I believe Wal-Mart will at least meet, if not beat expectations. But beyond the to-be-announced quarter, I'm still a bull. I'll wager dollars to doughnuts that consumers will retain their short arms when it comes to dipping into their billfolds.

Hey -- have a great day!
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No positions in stocks mentioned.

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