It’s always depressing filling up my vehicle with gas. It doesn’t take diesel, and it’s a 4 cylinder Toyota Tacoma, but it still cost me $63 the last time I filled it up. People always complain about gas prices, but most of us aren’t willing to cut it out of our budget completely. We are 21st century Americans who drive cars. Yes, even Texans drive vehicles that don’t require reins to direct them. Wal-Mart Stores, Inc. (NYSE:WMT) has announced some news that will make gas consumers happy.
In a recent Reuters poll conducted online, two thirds of adults are cutting back on their budget, with gas prices being the number one reason. Gisel Ruiz, COO for Wal-Mart U.S., said, “ I am constantly hearing that gas prices are making it tough for our customers to balance their budgets. For every cent gas prices climb, consumers have $1 billion less to spend.” Despite generating nearly $128 billion in the first quarter of this year, even they are cutting back. The company plans to cut gas prices up to 15 cents in 21 different states for customers paying with their cards.
So, what does Wal-Mart Stores, Inc. (NYSE:WMT) offer to investors?
Because it markets to blue collar customers (nearly everyone shops there, but studies have shown that American’s making over $100,000 shop far more online than at Wal-Mart), they are able to attract more people because of their discounted prices.
Amazingly, earnings per share (EPS) have risen annually for more than ten years, and it is fairly priced as it shows a 5.1% FCF yield. Its P/E is 15 and it shows gross margins of 24.9%.
Photo: Wal-Mart Stores, Inc. (NYSE:WMT)
Increased competition from companies like Amazon and Costco, however, is expected to decrease Wal-Mart’s gross margins.
How does Wal-Mart Stores, Inc. (NYSE:WMT) compare to others in the “gas industry”?
Exxon Mobil Corporation (NYSE:XOM) had revenues of $115.2 billion in 2012 and shows a low P/E of 9.4. Gross margins fell from 36.9% to 29.9% throughout 2012. Despite its dramatic fall in 2009, Exxon’s earnings per share have increased nine out of the past ten years. In fact, they have more than tripled. The company shows a market cap of nearly $406 billion and a FCF yield of 5.4%. These aren’t bad numbers for those investors looking for discounted stocks, but they aren’t the greatest either. The good news is that Exxon Mobil Corporation (NYSE:XOM) doesn’t appear that gas companies will be struggling anytime soon.
Chevron is a company with a market cap of $231.2 billion. In 2012, revenues increased 4.3% to a total of $60.55 billion. It’s amazing to me how much money these companies generate by selling products that every American (and most people worldwide) needs. EPS have increased eight of the past ten years, while its gross margins have increased from 33.7% to 41.8%. It’s FCF yield is just 3.4%, but its P/E is a solid 9. Let’s look at the graph below to see how these companies have fared recently.
The Foolish Bottom Line…
All of these companies show fair value to bargain investors, but they also show attractive metrics for growth investors. They don’t show the best metrics in any category, but they’re solid in most areas. The gas and oil industry, at least at this point, doesn’t seem to be floundering. Each of these companies seems to present a good opportunity and a potentially bright future.
The article Wal-Mart Hopes to Woo Gas Users originally appeared on Fool.com.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
Related tickers: Wal-Mart Stores, Inc. (NYSE:WMT), Exxon Mobil Corporation (NYSE:XOM)
