NEW YORK (CNN/Money) - Wal-Mart Stores Inc. reported improved third-quarter earnings Wednesday that beat Wall Street expectations despite sluggish back-to-school sales.

But the company said fourth-quarter earnings could meet or fall just below the current consensus forecast, due to continued modest sales growth.

Shares of Wal-Mart (WMT: up $0.80 to $54.65, Research, Estimates), a component of the Dow Jones industrial average, were up slightly late Wednesday afternoon following the report and guidance.

Analysts expect the retail sector to post mediocre holiday sales as the sluggish economy and waning consumer confidence crimp spending. But they expect Wal-Mart to outperform, helped by its wide selection of low-priced toys and gifts.

"It's clear that [Wal-Mart] is going to offer very sharp price [discounts] to drive customer traffic," Bill Dreher, retail analyst with WR Hambrecht, told Reuters. "While [fourth-quarter] sales will be respectable, the lower prices necessary to drive traffic will filter through to earnings that are below the current consensus estimates."

The world's largest retailer earned $1.8 billion, or 41 cents a share, in the quarter ended Oct. 31, up from $1.48 billion, or 33 cents, a year earlier. Analysts surveyed by earnings tracker First Call had a consensus earnings-per-share forecast of 40 cents a share.

On a recorded call Wednesday, Wal-Mart said better margins, fewer markdowns and less theft -- or "shrinkage" as it is known in the industry -- contributed to stronger third-quarter earnings.

The company said it expects fourth-quarter earnings per share between 53 and 55 cents. First Call's consensus EPS forecast is 55 cents, with a range of analysts' estimates from 52 to 57 cents. The company earned 49 cents a share a year earlier.

Revenue in the third quarter rose to $58.8 billion from $52.7 billion a year earlier, but that missed First Call's forecast of $59.8 billion due to a weaker-than-expected back-to-school shopping season. Sales at stores open at least a year, a closely watched retail measure known as same-store sales, gained 3.5 percent in the quarter.

Wal-Mart expects fourth-quarter same-store sales to be up between 3 and 5 percent.