Walmart earnings: Attractive prices and digital offerings drive continued share gains
We plan to raise our fair value estimate of Walmart stock; shares still look overvalued.
Mentioned: Walmart Inc (WMT)
Key Morningstar metrics for Walmart
- Fair Value Estimate: $63.00
- Morningstar Rating: ★
- Morningstar Economic Moat Rating: Wide
- Morningstar Uncertainty Rating: Medium
What we thought of Walmart’s earnings
Walmart’s WMT top line increased by 2.5% in the first quarter (4.0% in constant currency), led by comparable sales growth of 4.5% at its domestic stores and 6.7% at Sam’s Club. Adjusted EPS of $0.61 improved $0.01 from last year.
Why it matters: Walmart delivered strong top-line growth despite grappling with an uncertain economic backdrop. We expect the retailer’s scale and attractive pricing position to resonate with cautious consumers and yield continued market share gains in coming quarters.
- Walmart’s namesake stores delivered mid-single-digit growth in grocery sales, outpacing the 2% average annual growth in food at home inflation from February to April 2025. Market share gains in high-frequency categories should bode well for customer retention longer term.
- Management noted that tariffs will result in higher prices for select product categories. Higher prices and weak consumer sentiment will likely weigh on near-term demand, but we think Walmart’s scale and attractive price points should allow it to outperform smaller peers.
The bottom line: We plan to raise our $63 fair value estimate on wide-moat Walmart by a low-single-digit percentage due to the time value of money. Still, shares look overvalued, in our view, trading at 35 times our forecast for fiscal 2026 EPS.
- Results closely aligned with our forecast, and we don’t plan to materially alter our fiscal 2026 estimates for 4% sales growth and $2.68 in adjusted EPS. We also expect to maintain our 10-year explicit forecast, which calls for average growth in sales and EBIT of 3.5% and 6.5%, respectively.
- We are optimistic that Walmart can take market share during tumultuous economic times and enjoy margin expansion as lucrative revenue streams, such as advertising, scale. Still, given its size, we struggle to see how the firm can grow faster than a mid-single-digit pace in the long run.
