Skip to main content

Can Wal-Mart Stores Inc (WMT) Stock Stay Hot?

By U.S. News & World Report

Wal-Mart Stores Inc (NYSE: WMT) is doomed, retail is dead and Amazon.com ( AMZN) is the reaper’s scythe — or at least, so goes the narrative. But you’ll have to apologize if this all seems new to WMT stockholders, who are sitting on market-beating returns of 16 percent in 2017.

Kidding aside, this has been a brutal year for retail, with former giants such as Macy’s ( M) and J.C. Penney Co. ( JCP) shedding roughly 40 percent and 50 percent, respectively, and the broader SPDR S&P Retail ETF ( XRT) off by nearly 10 percent.

Walmart seems particularly ill-positioned this year, what with Amazon already challenging it with its legacy e-commerce business, then bolstering its muscle for the grocery fracas by snapping up Whole Foods Market ( WFM).

[See: 9 Investing Steps From Warren Buffett’s Playbook.]

And yet, Walmart stands days away from its Thursday morning earnings report with pleased shareholders and even optimism from the analyst community.

The headline numbers. Wall Street’s expectations for Walmart’s second-quarter earnings report are nothing to do cartwheels over. Projections are for a bottom line of $1.07 per share that would be unchanged year-over-year, and top-line expansion of just 1.7 percent.

Given the recently reported sales declines from Macy’s and Kohl’s Corp. ( KSS), not to mention even more anemic second-quarter expectations for rival Target, that’s not much reason for pessimism. The flip side, though, is not even Street-beating results were able to keep M and KSS from selling off heavily following their results. Thus, Walmart’s ability to manage expectations — evidenced by its string of beats dating back to midway through calendar 2015 — mean a beat, while likely, won’t necessarily be enough to keep fueling this recent rally in WMT stock.

Walmart, the survivor. Walmart joined a host of companies with grocery businesses in dropping like rocks back in mid-June, when Amazon announced its purchase of organic grocer Whole Foods for $13.4 billion. The premise is twofold — that Amazon will make Whole Foods’ offerings more competitive on price, and that Whole Foods will act as a distribution network for the AmazonFresh delivery service — a two-pronged attack on brick-and-mortar businesses with grocery businesses, whether it’s pure plays like Kroger Co. ( KR), warehousers like Costco Wholesale Corp. ( COST) or big-box retailers like Walmart and Target.

But while investors were busy selling the narrative, Wall Street was quick to warn, “Not so fast!”

In mid-July, once some of Whole Foods’ quinoa dust had cleared, Goldman Sachs not only upgraded WMT stock from “neutral” to “buy,” but went so far as to add it to its list of the analyst house’s top ideas.

Analyst Matthew Fassler said Walmart is “well positioned as any mass market retailer” and can “sidestep the juggernaut,” referring to Amazon and its e-commerce heft.

[Read: The Retailers’ Guide to Beating Amazon.]

That’s in large part because Walmart has been both prudent and aggressive in expanding its own web capabilities, acquiring the likes of ModCloth, Bonobos and Moosejaw this year alone, though most important was its 2016 buyout of rapidly expanding Jet.com in August 2016 and putting CEO Marc Lore in charge of Walmart eCommerce U.S. That last acquisition has paid off in spades, with Walmart boasting a 63 percent jump in digital sales last quarter that sparked a quick run in WMT.

And while Amazon does appear to be a long-term threat to Walmart’s grocery business, Oppenheimer’s Rupesh Parikh nonetheless slapped an “outperform” rating on WMT stock in early August, calling it “fresher than it’s been in years” and stating Walmart is poised to grab even more grocery market share.

Walmart’s e-commerce merger and acquisition spree is behind some of that optimism, but so are other grocery initiatives, including giving more exposure to private-label brands and widening its offerings of “fresh products.” It’s also making personnel shifts, such as creating separate leadership roles for its deli and bakery businesses.

How much of that filters into Thursday’s report remains to be seen, though groceries could be a strong spot, with July’s Consumer Price Index showing an uptick in food prices for the first time since November 2015. It’s also vital that Walmart show continued breakneck growth in its e-commerce operations.

Competitors also have provided a couple of positive foreshadowing, including Target upgrading its Q2 forecast and Macy’s and Kohl’s results — which while far from good were still better than expected. It may be that Walmart’s estimates include a similar abundance of pessimism, making the bar a little easier to clear.

That doesn’t necessarily make WMT stock a lock to jump this Thursday. But Walmart still is a best-in-class retailer, and an earnings disaster appears unlikely.

More Earnings in Focus

Target Corp. ( TGT). Target shares have rebounded 10 percent over the past month — even including a recent sympathy dip alongside Macy’s and Kohl’s — versus less than 2 percent gains for the XRT. Credit goes to a mid-July upgrade in the company’s second quarter forecast, with the company expecting a “modest increase” in same-store sales and earnings above the high end of its previous range of 95 cents to $1.15 per share. Target announces second-quarter results Wednesday morning, when analysts will be looking for fractional revenue growth to $16.3 billion on a 5 percent year-over-year decline in profits to $1.17 per share.

Alibaba Group Holding (BABA). Alibaba sent Wall Street into a frenzy back in June when it announced an aggressive forecast for current-year revenues. The Chinese e-commerce titan said at the time it expects 45 to 49 percent top-line growth, blowing the consensus estimate of 31 percent revenue expansion out of the water. Part of the optimism there comes from blossoming businesses such as the cloud, as well as travel service platform Fliggy, which is the subject of a joint venture with Marriott International ( MAR). JPMorgan analyst Alex Yao said in a bullish June note that marketing data services will push BABA stock to $190, some 25 percent higher from current prices. We’ll see if reality matches hope Thursday before the opening bell. Analysts expect BABA to report a 25 percent jump in profits on 47.5 percent revenue growth to $7.06 billion.

This Week’s Earnings Calendar

Monday. JD.com ( JD), Sysco Corp. ( SYY)

Tuesday. Agilent Technologies ( A), Advance Auto Parts ( AAP), Coach ( COH), Dick’s Sporting Goods ( DKS), Home Depot ( HD), TJX Cos. ( TJX), Urban Outfitters ( URBN)

Wednesday. Cisco Systems ( CSCO), L Brands ( LB), NetApp ( NTAP), Target, Vipshop Holdings ( VIPS)

[See: 7 of the Best Stocks to Buy for 2017.]

Thursday. Alibaba, Applied Materials ( AMAT), Gap ( GPS), Madison Square Garden Co. ( MSG), Ross Stores ( ROST), Walmart, Zoe’s Kitchen ( ZOES)

Friday. Deere & Co. ( DE), Estee Lauder Cos. ( EL), Foot Locker ( FL)

More from U.S. News

7 Dividend Stocks to Buy That Pay More Each Year

20 Awesome Dividend Stocks for Guaranteed Income

10 Ways You Can Throw Retail Stocks in Your Cart

Can Wal-Mart Stores Inc (WMT) Stock Stay Hot? originally appeared on usnews.com

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
Read Next Story

Related News

Frustration grows in Venezuela as earthquake death toll reaches 1,430

Israel and Lebanon sign framework agreement with US in ‘first step’ toward peace, Rubio says

Trump-endorsed populist poised to become Colombia’s next president as rival challenges vote