Tuesday, November 13, 2007

Wal-Mart Beats: International Operations & Buybacks Strong

I just cannot understand why Wal-Mart(WMT) CEO Lee Scott is not plowing money into the international operations. The best news is at the end of the post though.

Here are the sales growth numbers:
Sam's Clubs= 6.1%
Wal-Mart= 6.4%
International= 16.9%

International sales, last year at 23% of sale currently stand at 27% this year. That is a significant jump when you are talking about $92 billions in sales, 4% of that is a huge number. Earnings per share from continuing operations was $0.70, up from $0.62 per share last year. Earnings per share from continuing operations for the third quarter were impacted positively $0.01 per share due to the recognition of $46.5 million in after tax gains from the sale of certain real estate properties.

Earnings for Q4 to be between 99 cents per share and $1.03 per share and the full year should be between $3.13 and $3.17. Analysts project quarterly earnings per share of $1.02 and full-year profit of $3.09 per share.

Earnings growth increases:
Sam's Club= 6.2%
Wal-Mart= 11.1%
International= 8.6%

Wal-Mart gave the usual lowball 0% to 2% same store sales growth going forward and it is getting to the point that this projection is becoming meaningless.

Now, one might say hey, the Wal-Mart stores profit growth was in excess of the international operations, what gives? Why are the international operations more important?

Wal-Mart has induced heavy price cutting in US locations and the upcoming holiday shopping season has boosted results there. The question that needs to be asked is how much is left there? How much further can they cut? We know that there is saturation of locations in the US but internationally, there is hug
e room.

Admittedly Wal-Mart has not been successful in all markets but where they are a hit, they are huge and the results quarter after quarter are proving that.

What makes me the most happy? The company repurchased than 63 million shares in the third quarter, worth $2.8 billion. For the nine months, the company has repurchased almost 115 million shares, worth $5.3 billion.

In October I said, "I am looking for at least $1.5 to $2 billion in the current quarter, anything less is unacceptable. If current management is serious about shareholders, the almost $3 billion reduction in capex spending ought to go directly to repurchasing stock." Nothing like getting what you ask for at Christmas. Since the new $15 billion repurchase plan was announced in June, Wal-Mart has now bought about $3.8 billion of it.

That being said, Q4 will have cash flooding Wal-Mart coffers. With prices still at decade low levels, there is no reason we should not expect $3 billion plus to be repurchased.

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