WAL-MART STOCK CHURNS AFTER OUTLOOK, RATING CUT

Byline: Valerie Seckler

NEW YORK — Wal-Mart’s stock slid 1 1/4 to end at 24 1/8 Wednesday and was the most heavily traded issue on the Big Board, after its earnings outlook and stock rating were lowered by an investment bank.
More than 11,584,700 Wal-Mart shares changed hands during yesterday’s session, more than triple their average daily volume of 3.1 million shares.
Mark Husson, retail analyst at J.P. Morgan Securities, downed his 1996 earnings estimates for Wal-Mart to $1.34 a share from $1.36, and to $1.52 a share from $1.54 for 1997.
“The underlying numbers aren’t looking too clever, and they’re not doing too well going into Christmas selling,” Husson said Wednesday, citing lackluster October comp-store sales increases and the boost that third-quarter profits got from the sale of Wal-Mart’s photofinishing business to Fuji.
“I estimate the Fuji deal lifted earnings by two-to-three cents a share,” Husson continued. “The speculation on Wall Street is that without the sale, profits would have been flat with last year.”
The analyst further projected that Wal-Mart will take a write-off of $110 million to cover dropping computers.
Wal-Mart’s comps grew 4.2 percent for October, compared with more robust gains at several chains, including Target, up 9.6 percent; Shopko, up 13.6 percent; MacFrugals, up 14 percent, and Goody’s Family Clothing, up 20.5 percent. However, Kmart was only up 1.3 percent.
“Wal-Mart is still one of the best retailers out there, but the earnings outlook is weaker than it was two months ago,” added Husson, who’s kept his market performer rating on the issue.
However, Robinson-Humphrey & Co. on Wednesday slashed its short-term rating on Wal-Mart to market perform from buy. The investment bank noted the chain’s management is comfortable with the low-end of Wall Street’s fourth-quarter earnings estimates, which range from 47 to 53 cents a share. It netted 41 cents a share in the prior-year period.
The heavy stock action followed the report of Wal-Mart’s third-quarter results Tuesday, which came in a penny shy of Wall Street estimates.
Wal-Mart netted $684 million, or 30 cents, in the quarter ended Oct. 31, up 11.8 percent from $612 million, or 27 cents. Sales advanced 12 percent to $25.6 billion from $22.9 billion.

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