Financial Advisors Take a Closer Look at Wal-Mart on the Back of Wage Boost, Sam’s Club Closings News

The US stock market extended its gains on the second trading week of 2018 with three main indexes, S&P 500, Dow Jones Industrial Average and Nasdaq Composite covering more ground ahead of the beginning of the fourth-quarter earnings season and amid high levels of optimism regarding the state of the US economy. In this way, between January 8 and January 12, the Dow Jones Industrial Average advanced by 2.01% followed by the Nasdaq Composite and the S&P 500, which increased by 1.74% and 1.57%, respectively. On Tuesday, the S&P 500 closed at 2,751.29, registering the best start of the year since 1987. However, the following day the Nasdaq Composite and S&P 500 ended the gaining streak as they closed lower alongside the Dow Jones Industrial Average following concerns that Chinese government might reduce or even stop buying US sovereign debt. According to a report by Bloomberg News, Chinese officials think that US debt is becoming less attractive in comparison to other assets. Indexes recovered later in the day, but then slid again on the back of concerns that the US might pull out of the North American Free Trade Agreement, according to Canadian government’s expectations expressed by anonymous sources cited by Reuters. Later this month, negotiators from the US, Mexico and Canada will meet for the sixth and penultimate round of talks regarding the treaty. By Friday, the S&P 500 and Dow Jones Industrial Average reached record highs as the first companies started to file their financial results.

For the following several weeks, the spotlight will be on earnings and investors have very high expectations for a couple of reasons. First, the macroeconomic situation is stable, with the US economy growing by more than 3% in the second and third quarters and the New York Federal Reserve estimates a 4% growth in the fourth quarter. Moreover, last month President Donald Trump signed a bill that cut the corporate tax rate to 21% from 35%, which prompted many analysts to increase their earnings expectations. Investors will be looking through financial reports searching for hints from companies’ management on how the tax cut will affect them, but the expectations are mostly positive. Analysts expect fourth-quarter earnings for the S&P 500 to advance by more than 11.5%.  FactSet estimates that all eleven S&P 500 sectors will report increases in earnings and revenue, with energy expected to show the best results. Energy companies’ earnings and revenue are projected to grow by 133% and 17%, respectively. Revenue and earnings in Materials and Information Technology are also expected to grow by 16.7% and 28.3%, and 11% and 16%, respectively, according to FactSet.

In the meantime, Financial Advisors are focusing on business news ahead of the earnings season. According to TrackStar, InvestingChannel’s official newsletter capturing and analyzing the trends of Financial Advisors, Financial Advisors last week shunned the few companies that posted their financial results at the end of last week. Among these companies were two large banks, JPMorgan Chase & Co. (NYSE:JPM) and Wells Fargo & Co (NYSE:WFC), neither of which was included in TrackStar’s list of 20 most searched tickers. On the other hand, Bank of America Corp (NYSE:BAC), which was scheduled to post its fourth-quarter results on January 17 ranked on the first spot on the list. It was followed by Apple Inc (NASDAQ:AAPL) and, Inc. (NASDAQ:AMZN), the latter’s stock having crossed the $1,300-mark last week, which prompted a number of analysts to raise their price targets on the stock. Other companies that ranked among the top five most searched tickers include Abbott Laboratories (NYSE:ABT) and General Electric Company (NYSE:GE) both of which were in the spotlight last week on the back of various developments.

In this article, we are going to take a closer look at Wal-Mart Stores Inc (NYSE:WMT), which ranked as the seventh most searched ticker among Financial Advisors last week and made the list of the most searched tickers for the first time since the beginning of November. Wal-Mart Stores Inc (NYSE:WMT)’s shares have inched up by 2% since the beginning of the year and is up by 50% over the last 12 months.

There were two main events last week that might have put Wal-Mart Stores Inc (NYSE:WMT) in Financial Advisors’ cross hairs. On Thursday, the company said it would increase the minimum hourly wage to $11 and would expand maternity and parental leave benefits and provide a one-time cash bonus for eligible associates of up to $1,000. In addition, Wal-Mart Stores Inc (NYSE:WMT) plans to create a new benefit to assist associates with adoption expenses. Overall, the changes will affect more than 1 million hourly associates and will result in $300 million incremental to what was included in the company’s next fiscal year’s plan. The one-time bonuses will represent an additional payment to associates of approximately $400 million in the current fiscal year that ends on January 31. Later the same day, the retailer confirmed multiple reports of Sam’s Club closings in larger US cities. The move was officially announced on Friday. Wal-Mart Stores Inc (NYSE:WMT) said it would close 63 membership-only retail warehouse clubs and plans to convert 12 of the affected stores to e-commerce fulfillment centers. The company will take a once-time charge of $0.14 per share related to the closings.

Sign Up

Get the InvestingChannel
Free e-Letter Today

Learn More

Independent market opinion, analysis and ideas - delivered every business day

Premium market opinions, analysis, and ideas - delivered every business day

Editor's Picks