Wal-Mart Revised to $72: Strong International Growth Despite Weaker Earnings

Wal-Mart’s (NYSE:WMT) low-pricing strategy to attract customers during the holiday season resulted in a 15% drop in its Q4 profits. The company missed analysts’ sales estimates for Q4 by 0.8%, according to Thomson Reuters. The share price saw a 6% decline since the earnings announcement on February 21. Wal-Mart competes with other big retailers like Target (NYSE:TGT), Costco (NASDAQ:COST) and Best Buy (NYSE:BBY) as well as online retailers like Amazon (NASDAQ:AMZN) and eBay (NASDAQ:EBAY).

We have a revised price estimate of $72.53 for Wal-Mart, implying a premium to the current market price. Wal-Mart’s international operations witnessed substantial growth in 2011, which exceeded our estimates. We have revised our numbers to incorporate the same.

See our full analysis for Wal-Mart

International Segment Delivers Impressive Growth

• Wal-Mart’s international segment has been a major growth driver for the company mainly since 2008 when the economy started deteriorating. Strong comparable sales growth and a record number of new units, including the acquisitions of Netto and Massmart, contributed to impressive annual results.
• The international segment witnessed a 15.2% y-o-y increase in net sales for fiscal year 2012. In 2011, Wal-Mart added approximately 550 units to its store count, including the acquisition of Massmart.
• Wal-Mart gained its first foothold in Africa last year with the approval of its $2.4 billion bid for Massmart, which runs nine wholesale and retail chains with approximately 288 stores in 14 African countries.

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