Zacks Analyst Blog Highlights: Wal-Mart Stores, Costco Wholesale, Target, TRWAutomotive Holdings and Autoliv

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Feb 22, 2011, 09:30 ET

CHICAGO, Feb. 22, 2011 /PRNewswire/ -- Zacks.com Analyst Blog features: Wal-Mart Stores Inc. (NYSE: WMT), Costco Wholesale Corporation (Nasdaq: COST), Target Corp. (NYSE: TGT), TRWAutomotive Holdings Corp. (NYSE: TRW) and Autoliv Inc. (NYSE: ALV).

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Here are highlights from Friday's Analyst Blog:

Earnings Preview: Wal-Mart Stores

Wal-Mart Stores Inc. (NYSE: WMT), one of the world's leading retail operators, is scheduled to report its fourth-quarter and full-year 2011 financial results on Tuesday, February 22, 2011. The current Zacks Consensus Estimate for earnings and revenue for the quarter to be reported are $1.31 per share and $1.18 billion, respectively.

Third-Quarter 2011, a Synopsis

Wal-Mart, which faces stiff competition from Costco Wholesale Corporation (Nasdaq: COST) and Target Corp. (NYSE: TGT), reported better-than-expected third-quarter 2011 results and raised its EPS outlook for the rest of fiscal 2011. The retailing giant reported quarterly earnings of 95 cents a share, reflecting an increase of 15.8% over the prior-year earnings of 82 cents a share.

However, (excluding the benefit of one-time items) earnings were in line with the Zacks Consensus Estimate of 90 cents per share.

Management raised its full-year 2011 EPS guidance to a range of $4.08 to $4.12 per share. Prior-year guidance was in the range of $3.95 to $4.05. For the fourth quarter, the company expects earnings in the range of $1.29 to $1.33 per share. The Zacks Consensus Estimate for earnings for fiscal 2011 is $4.05 a share.

Management Guided

At its last earnings conference call, Wal-Mart had forecasted fiscal 2011 earnings in the range of $4.08 to $4.12 per share. The current Zacks Consensus Estimate for fiscal 2011 is $4.05.

For fiscal 2011, management raised its EPS guidance from $4.08 to $4.12. The increase in full-year guidance reflects the tax benefit from the third quarter.

Fourth-Quarter 2011 Zacks Consensus

Analysts covered by Zacks expect Wal-Mart to post fourth-quarter 2011 earnings of $1.31 a share. The current Zacks Consensus Estimate represents a year-over-year increase of 11.9% and ranges from a low of $1.28 to a high of $1.35.

The current estimate did not change over the last 90 days as none of the analysts revised their estimates. However, the Zacks Consensus Estimate inched down 1 cent from $1.32 to $1.31 as two brokers had revised their estimates downward in the last 30 days.

Mixed Earnings Surprise History

With respect to earnings surprises, Wal-Mart has outpaced the Zacks Consensus Estimate over the last four quarters with an average of 3.42%.

Our Recommendation

Wal-Mart reported strong performance in the third quarter of fiscal year 2011, which was driven by strong international presence of the retail giant. However, intense competition across its various segments is a matter of concern. The significant international presence has boosted growth and we believe will continue doing the same in the coming years. The company also possesses a strong balance sheet.

However, the intense competition across its various segments and fluctuations in currency exchange rates, given its vast international operations are a matter of concern.

Wal-Mart currently holds a Zacks #4 Rank which translates into a short-term Sell recommendation. Nevertheless, on a long-term basis, we maintain a Neutral rating on the stock.

TRW Sales Up on Higher Volume

TRWAutomotive Holdings Corp. (NYSE: TRW) posted a profit of $225 million or $1.72 per share in the fourth quarter of 2010 compared with $168 million or $1.40 per share in the same quarter of prior year. The profit outstripped the Zacks Consensus Estimate by 49 cents per share. The results excluded special items such as restructuring charges, debt retirement charges, a net gain related to pension obligations and favorable net tax items.

Sales in the quarter escalated 10% to $3.71 billion driven by higher global vehicle production volumes than the prior year quarter, offset partially by the negative impact of currency movements. It has also surpassed the Zacks Consensus Estimate of $3.43 billion.

Operating margin (excluding the above-mentioned items) improved to 8.4% from 7.5% in the fourth quarter of 2009. This was attributable to higher sales, offset partially by unfavorable currency exchange rate movements and a rise in raw material prices.

Earnings before interest, taxes, depreciation and amortization and the above-mentioned special items were $426 million in the quarter compared with $384 million in the prior year.

Annual Results

For full year 2010, TRW depicted a profit of $844 million or $6.57 per share, exceeding the Zacks Consensus Estimate by 55 cents per share. The profit was remarkably higher than $137 million or $1.26 per share reported in 2009.

Sales in the year elevated 24% to $14.38 billion, which was marginally higher than the Zacks Consensus Estimate of $14.12 billion. The increase in sales was attributable to same volume rise during the year.

Operating margin significantly rose to 8.4% from 3.6% a year ago. The improvement was led by the higher sales and the positive impact of the company's restructuring and cost containment actions.

Outlook

TRW anticipates sales in the range of $14.9 billion−$15.3 billion for full year 2011, including $3.9 billion for the first quarter of the year. The expectations were based on the assumptions of an industry production volumes of 12.7 million units in North America and 18.7 million units in Europe. The company still expects China and the rest of world regions to be the growth drivers in 2011.

TRW Automotive is a leading manufacturer of advanced technology products and services for the automotive markets. Beside the impressive results and promising outlook, high customer concentration and rising raw material prices have led the company to retain a Zacks #3 Rank on its stock, which translates to a "Hold" rating for the short term (1 to 3 months).

Peer Comparison

TRW's competitor, Autoliv Inc. (NYSE: ALV), performed impressively in the fourth quarter as well. The company showed about threefold increase in profit of $177.5 million or $1.89 per share in the quarter from $61.3 million or $0.68 per share in the same quarter of 2009. The profit far exceeded the Zacks Consensus Estimate by $0.21 per share. The increase in profit was attributable to higher sales (especially in the Rest of the World region) and restructuring measures.

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