Wal-Mart Earnings Preview Against Sears, Target, Home Depot

Wal-Mart Stores Inc. (NYSE: WMT) is set to report earnings early on Thursday morning.  This earnings report is likely to be very different from any prior earnings report due to all of the bribery charges and allegations from South of the Border.  What investors need to focus on is how much Wal-Mart has recovered as the failed breakout from $62 turned into an instant failure with shares falling down to about $57.50 before recovering to back above $59.00.  Keep in mind that this recovery has taken place during a serious market slide.

Thomson Reuters has estimates of $1.04 EPS and $110.4 billion in revenue.  We worry that currency could be an issue, but that may be the case for this current quarter rather than the quarter-end of April.  Estimates for the coming quarter are $1.16 EPS and $115.31 billion.

Wal-Mart’s stock chart matters immensely here.  The 50-day moving average has acted as significant resistance and that level is currently $59.75.  As it turns out, %59.50 to $59.75 acted as the last floor in February after the prior breakout attempt failed.  It probably does not hurt that Warren Buffett and Berkshire Hathaway Inc. (NYSE: BRK-B) just raised the stake considerably in Wal-Mart shares.

Options traders are not expecting much of a move on the earnings.  While expiration date is this Friday, the options trades only have an event-pricing of up to about $1.20 or so in either direction.  The stock fell $2.00 after the prior earnings report in February.

Analysts have not abandoned Wal-Mart and the current $59.20 or so price compares to a Thomson Reuters consensus target of $63.82 on the stock.  Wal-Mart yields 2.7% and the 52-week trading range is $48.31 to $62.63.

Keep in mind that Target Corporation (NYSE: TGT) has already report earnings and the stock is up only 0.7% in a late-day reaction.

Sears Holdings Corporation (NASDAQ: SHLD) is also set to report earnings on Thursday but the retailer under Eddie Lampert and friends is thinly followed by the analyst community.  Of the few estimates (literally three estimates) from Thomson Reuters we see a “consensus” of a loss at -$0.67 EPS on $9.15 billion in sales.  Sears shares are down 3.2% around $51.25 late on Wednesday ahead of the report and that is against a 52-week range of $28.89 to $85.90.  Keep in mind that Sears shares are down from $65.00 as recently as May 1 but the price the day before (April 30) was only $53.78.  Volatility rules the roost here, and maybe the short interest of 10.55 million shares too (over 8-days to cover ratio).

Another more broad issue is that The Home Depot, Inc. (NYSE: HD) stubbed its toe this week as the stock is down by more than 2% from its pre-earnings level.  Investors were hoping that it is doing better along with a slight housing recovery or bottoming-out.  Its stock was initially down about 3% closer to $48 after the earnings report against a 52-week trading range of $28.13 to $52.88.

Thursday is set up to be an interesting day for large retail earnings.  Wal-Mart could be a wild card in either direction.

JON C. OGG