Wal-Mart (WMT) Set to Deliver U.S. Comps Above the Street, Which Could Keep Momentum Going - Morgan Stanley

New 2016 Dog of the Dow stock Wal-Mart (NYSE: WMT) is having a great year so far while the popular average struggles. The stock is up 10% YTD, while the Dow 30 is down 4.6% during the same time period. Today, Morgan Stanley analyst Simeon Gutman gave investors another reason to be sanguine.

The firm said their low end spending indicator now points to a Q4 US comp of 1.5% versus their prior estimates and the Street consensus of 1.0%. The firm's gauge is comprised of several macro variables which have historically correlated well (86%) with WMT US comps (wage growth, food inflation, consumer confidence, gas prices).

Gutman said there our two variables have changed over the last few months: First, the National Federation of Independent Business' (NFIB) Index for Small Business Optimism, which measures small business owners' plans to raise worker compensation, accelerated from ~15% to 20%. Second, wages for low end consumers continue to accelerate, growing 5.6% vs. +4% two months ago.

The analyst said if WMT delivers a 1.5% comp and meets/beats EPS estimates in Q4, it would likely affirm the stock's recent move higher and may keep its momentum going.

The firm is not upgrading the stock though. They keep an Equal-weight rating and price target of $65 on WMT.

For an analyst ratings summary and ratings history on Wal-Mart click here. For more ratings news on Wal-Mart click here.

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