Walmart Faces Mixed Results as Stock Takes a Hit

Walmart’s (NYSE: WMT) recent quarterly earnings sparked a 7% decline in its stock price on February 20th. Although the company surpassed analyst expectations in both revenue and earnings, its cautious outlook for future profit growth raised concerns. In Q4, Walmart reported a 4% year-over-year (y-o-y) revenue increase, a 9% y-o-y adjustment in operating income, and a notable 20% increase in e-commerce sales. Despite these positive figures, the company projected a slowdown in profit growth ahead. As a point of comparison, Walmart’s stock is up 8% year-to-date, outpacing the 4% gain in the S&P 500 index, while its competitor Target (NYSE: TGT) has experienced a 6% drop in stock price over the same timeframe.

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FY’26 Outlook Shows Slower Growth

For the fiscal year ending January 2026 (FY’26), Walmart anticipates net sales growth of 3-4% and adjusted operating income growth of 3.5-5.5%, taking into account a 150-basis-point impact from its Vizio acquisition and the effects of a non-leap year. This projection falls below the impressive 9.7% adjusted operating income growth reported for FY’25. The company estimates adjusted earnings between $2.50 and $2.60 per share for the year, excluding potential tariff implications. Investors seeking a less volatile investment option might consider the High Quality portfolio, which has performed strongly compared to the S&P 500, posting over 91% returns since its inception.

Debt Concerns and Stock Valuation

Walmart’s valuation has been adjusted to $98 per share, based on an expected EPS of $2.56 and a P/E multiple of 38.4x for FY’26, closely aligning with the current market price. Revenue projections for the fiscal year stand at $704 billion, reflecting a 3% y-o-y increase. It’s important to mention that Walmart carries $45.5 billion in debt while holding $9 billion in cash. Current high financing rates add pressure, increasing both long-term risk and interest expenses. Compounding these challenges, U.S. comparable sales growth has shown signs of slowing throughout FY’25, with quarterly growth rates recorded as 4.9% in Q1, 4.2% in Q2, 5.1% in Q3, and a decrease to 4.6% in Q4.

Q4 Performance Highlights

During Q4, Walmart experienced a 2.8% increase in transactions, and average basket size rose by 1.8%. The company’s revenues reached $180.6 billion, representing a 4.1% y-o-y growth. Furthermore, Walmart’s global advertising segment expanded by approximately 29% in the quarter, with U.S. operations for Walmart Connect growing by 24%. The company’s adjusted EPS climbed to $0.66, marking a 10% increase from the previous year, attributing this growth to improved operating income in Q4.

Stock Volatility Compared to the S&P 500

Walmart’s stock has demonstrated significant volatility over the past four years, with returns varying widely: 2% in 2021, 0% in 2022, 13% in 2023, and a remarkable 74% surge in 2024. In contrast, the Trefis High Quality (HQ) Portfolio has shown considerably less volatility, comfortably outperforming the S&P 500 during the same time frame. This demonstrates how HQ Portfolio stocks have delivered better returns with lower risk compared to the benchmark, offering a smoother investment experience.

Walmart vs. Its Peers

To fully grasp the landscape, it’s beneficial to see how Walmart compares to its peers. WMT Peers provides insights into how Walmart’s stock stacks up against competitors on crucial metrics. For additional comparisons, explore the Peer Comparisons section for various companies across different industries.

[1] Returns as of 2/21/2025
[2] Cumulative total returns since the end of 2016

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.