The Zacks Analyst Blog Highlights: Wal-Mart Stores, Foot Locker, Kroger, Estee Lauder and Skechers

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May 14, 2014, 09:30 ET

CHICAGO, May 14, 2014 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Wal-Mart Stores Inc (NYSE:WMT-Free Report), Foot Locker Inc (NYSE:FL-Free Report), Kroger Co. (NYSE:KR-Free Report), Estee Lauder Companies Inc. (NYSE:EL-Free Report) andSkechers USA Inc. (NYSE:SKX-Free Report).

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Tuesday's Analyst Blog:

Will Wal-Mart (WMT) Disappoint This Earnings Season?

Wal-Mart Stores Inc (NYSE:WMT-Free Report) is set to report first quarter fiscal 2015 results before the opening bell on May 15. Last quarter, this retail giant posted a positive surprise of 0.63%. Let's see how things are shaping up prior to the announcement.

Factors to Consider

Walmart has not had the best of times of late, as the company delivered weak results in all the four quarters of fiscal 2014 due to declining comparable store sales, weakness in the international markets and bribery allegations.

Though the retail giant's earnings and revenues in the last quarter managed to meet the consensus mark, earnings declined year over year due to softer comp sales. Weak consumer spending environment, especially during the holiday season, hurt comps in the quarter. Holiday profits were also eroded by severe winter storms, increased competition and reduced food-stamp benefits for millions of Americans. Moreover, comps also declined in the first two weeks of February owing to winter storms that closed more than 200 stores – suggesting a weak start to the first quarter of 2014.

Walmart International has also been witnessing sluggish comps for the past few quarters owing to weakness in Mexico, Brazil and China. Walmart's international revenues grew by a mere 1% in fiscal 2014. We anticipate economic strains in the U.S. and abroad to likely pressurize its low-income shoppers in the upcoming quarter and fiscal 2015 as well.

For the first quarter of fiscal 2015, Walmart expects its adjusted earnings to range between $1.10 and $1.20 per share compared with $1.14 per share in the year-ago quarter. Walmart expects U.S. comp sales to be relatively flat for the 13-week period ending May 2, as against a decline of 1.4% last year. Sam's Club comp sales, without the impact of fuel sales, are expected to remain flat compared to a 0.2% increase last year.

The company expects macro-economic headwinds like reductions in government benefits, higher taxes, tighter credit and higher group health care costs to impact results in fiscal 2015.

Earnings Whispers?

Our proven model does not conclusively show that Walmart is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: The Expected Surprise Prediction or ESP for Walmart is 0.00% as both the Zacks Consensus Estimate and the Most Accurate estimate stand at $1.15 per share.

Zacks Rank #4 (Sell):We caution against stocks with Zacks Rank #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Other stocks in the retail sector that have both a positive earnings ESP and a favorable Zacks Rank are:

Foot Locker Inc (NYSE:FL-Free Report), with an Earnings ESP of +1.91% and a Zacks Rank #2 (Buy).

The Kroger Co. (NYSE:KR-Free Report), with an Earnings ESP of +0.95% and a Zacks Rank #2.

Estee Lauder Companies Inc. (NYSE:EL-Free Report), with an Earnings ESP of +1.82% and a Zacks Rank #3.

Is Skechers Part of Your Portfolio?

It is the right time to add Skechers USA Inc. (NYSE:SKX-Free Report) to your portfolio, if you haven't yet, as the stock is looking very promising now and the underlying factors are capable of carrying the momentum further. The stock holds a Zacks Rank #1 (Strong Buy) and has surged roughly 25.3% year-to-date, demonstrating its inherent strength. We believe the stock could prove to be a solid bet for investors.

Skechers' primary strength is its earnings surprise history. The company had outperformed the Zacks Consensus Estimates in 6 out of the past 9 quarters. Looking at its earnings surprise history of the last four quarters, this developer and distributor of footwear for men, women and children has topped the Zacks Consensus Estimate by an average of 125.8%, including a whooping earnings surprise of 84.9% in first-quarter 2014.

Shares of Skechers crafted a new 52-week high of $42.62 yesterday, and have shot up approximately 14.6%, since posting solid first-quarter results. The quarterly earnings of 61 cents a share surpassed the Zacks Consensus Estimate of 33 cents, and rose over fourfold from 13 cents in the prior-year quarter. The improved results were owing to strong top-line growth, effective cost management and a shift in a portion of advertising expenses to the second quarter as Easter fell in April this year.

Increased demand for products, product innovation across multiple categories and healthy performance across all revenue channels led to a 21% rise in revenues to $546.5 million, which came ahead of the Zacks Consensus Estimate of $507 million.

With increased focus on the new line of products, cost containment, inventory management, global distribution platform, healthy Apr 2014 order rates and backlogs, the company is confident of sustaining the growth momentum throughout 2014.

Ever since Skechers posted better-than-expected results, the Zacks Consensus Estimate has been trending upwards. The Zacks Consensus Estimates for 2014 and 2015 increased 13.8% and 14% to $2.06 and $2.69, respectively, in the last 30 days.

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

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