Walmart will report their fiscal Q1 results Thursday morning prior to the open. The options market is implying a one day move of about 2%, which is essentially in line with the 4 and 8 qtr avg.
Heading into the quarter, I think it is safe to say that expectations are not particularly high given all of the blame that bad winter weather received for weak results from a whole host of retailers over the past few months. Analysts expect earnings to rise only 1% year over year, following last qtr, its first quarterly eps decline since Q4 2009. The low expected growth juxtaposed to the stocks PE multiple, at 5 year highs, which could cause some investors to take pause if WMT does in fact guide down for their second consecutive quarter in 2014:
While the stock is unchanged on the year, it is up 9% from the February lows, and less than 2% away from the 2014 highs. The stock is likely to see a good bit of resistance at the 52 week and all time highs made late year at $81.37, which is basically inline with the implied move. On the downside, the March breakout level of about $76 should serve as decent near term support, which is also a tad below the stock’s 200 day moving average at $76.37:
Perhaps more telling than the result itself will be the stock’s reaction. Many “value” mega caps in 2014 have reported lackluster results, but the shares have quickly found a bid post-earnings as investors continued their rotation into what are perceived as safer names. The reaction after IBM earnings last month is a good example. In the case of WMT, while the trailing 12 month P/E is at a 5 year high, it is still in the mid teens, and WMT’s business, while stagnant, is hardly folding up anytime soon. If a weak number elicits no demand on the other hand, maybe that’s a sign that the recent large cap value rotation has run its course.