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Wal-Mart Stores 2012 1Q financial analysis

Walmart 2012 1Q results are quite good. 1Q revenue is up by +8,5% compared to previous year 1Q from 104 bn.$ to 113 bn.$ Income before depreciation is also up by +8,1% from 5,4 bn.$ to 5,8 bn.$.

Main driver of revenue and profit increase was increase of Walmart International sales by +15%. Sales in US increased by 6% Sams Club by 8%. Largest sale generator remains Walmart US which generates ~60% of all revenue. If you look at profit increase you will see a 21% increase in Walmart International profit which means that not only did the sales increased but also its profit margin which is very good. As Walmart International has quite strong positions in China, India, Brazil and Mexico a strongest growing markets. Since companies market in Europe is very small companies sales geography guarantees sustainable growth in coming few years. In general sesults are positive.

While companies results shows good results balance sheet is quite different. Equity level is floating around 35% which is acceptable level for retailer but ~50% would be comfortable. Another thing is below 1 liquidity ratio which has dropped to 0,83 at Q1. But this ratio is normal to all supermarkets as this is they key thing in their business bet large deffer payment from your suppliers that will fund your expatiation while your costumers pay you instantly that way funding your inventory storage. Inventory turnover is 33 days, account payables 39 both in line. This differences makes to 10 bn.$ in working capital surplus which fun companies long term asset like stores acquisition.

Low equity level allows to have good return on asset. Its around 20% at first 3 quarters and around 30% ar Q4 sale time. Companies paid 1,4 bn.$/Q in dividends and spend 1,6 bn.$ in share repurchase which is ~1/2 of total companies earnings which is quite normal level.  In general companies balance sheet can be treated as a bit risky.

Share value:

Equity / share 69,0 bn.$ 3,390 bn. 20,4 $/sh.
Market value 62,9 $ +42,5 $ 4,2 years
Year Net income before Depreciation 24,7 bn.$ +7,3 $/sh. 11,6 %

Companies share basic value is ~20,4$ (21,3$ compared to 4Q).  Current market price is ~63$ (61$), which shows that market is paying ~42,5$ more or 5,8 years (5,6 years) of Net income before Depreciation earnings  24,7 bn.$/year or 7,3$/share. Companies shares market evaluation is normal. Share profitability (Share market price/Net income before Depreciation) if not calculating goodwill write-off  is 11,6% (12%) which is good.

Company announced that it has increased dividends by 9% from 1,46$/year to 1,59$/year or 0,3975$/quarter or ~2,5% (2,6%) dividend yield which is good, with dividend payout ratio ~22% which is a very good level. In general companies main ratios has decreased a bit compared to Q4 but remains good for long term investments.

Analysis source: Walmart 2012 1Q financial results

Previous analysis: Walmart 2011 4Q financial analysis

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