Walmart shares face weakness following earnings: Were results bad?

Key takeaways

• WMT shares faced big pressure following its quarterly earnings release.
• WMT raised guidance and posted overall solid results, but that wasn't enough to please the market.
• A premium valuation and weaker-than-expected comparable sales results both led to the weakness.

Walmart (WMT - Free Report) delivered an overall solid release on Thursday, beating expectations on both the top and bottom lines while raising its full-year outlook. Still, shares moved sharply lower following the release as investors focused on slowing U.S. sales trends, softer near-term guidance, and the stock's elevated valuation.

The post-earnings reaction pushed shares into negative territory on a YTD basis, also well off their $135 per share 52-week highs.

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Walmart earnings

Walmart reported adjusted earnings of $0.81 per share, up 19.1% year over year from $0.68 and comfortably above the Zacks Consensus Estimate of $0.73. Revenue came in at $187.9 billion, rising 5.9% from the year-ago period and topping the Zacks Consensus Estimate of $186.26 billion.

Global e-commerce sales increased 23%, advertising revenue climbed 38%, and membership fee revenue rose 17%, reinforcing Walmart's progress in building higher-margin businesses beyond traditional retail.

Management also raised its fiscal 2027 outlook. Constant-currency net sales are now expected to grow 4% to 5%, up from the prior 3.5% to 4.5% range. Adjusted EPS is projected at $2.80 to $2.87, compared with the previous forecast of $2.75 to $2.85.

Why shares saw weakness

One concern was Walmart U.S. comparable sales excluding fuel, which increased 2.6%, falling short of our 3.1% consensus estimate and reflecting slower growth relative to recent quarters. Management noted that pharmacy deflation created a meaningful headwind, but the deceleration still weighed on sentiment.

Valuation likely magnified the disappointment. Ahead of earnings, Walmart traded at a 37.6X forward 12-month earnings multiple, a substantial premium for a mature retailer.

At that multiple, investors are paying for consistently strong execution and relatively few blemishes. Walmart delivered a good quarter, but slower U.S. comps and cautious Q3 guidance gave the market enough reason to reassess that hefty premium.

Bottom line

The broader growth story for Walmart (WMT - Free Report) remains intact, but Thursday's reaction shows that when expectations are this high, even a beat-and-raise quarter may not be enough to impress the market.