Is Walmart a Buy, Sell, or Hold in 2025?

Core Insights - Walmart's stock has dropped nearly 20% from its all-time high in February, prompting a review of its earnings results and outlook to assess investment potential [2] - The company reported $180.6 billion in revenue for fiscal Q4 2025, a 4.1% year-over-year increase, but net income decreased from $5.7 billion to $5.3 billion [3][4] - Walmart's management remains cautiously optimistic for fiscal year 2026, projecting net sales growth of 3% to 4% and adjusted earnings per share (EPS) between $2.50 and $2.60, indicating little to no growth from fiscal year 2025's EPS of $2.51 [9] Financial Performance - Walmart's revenue for fiscal Q4 2025 was $180.6 billion, a 4.1% increase year-over-year, while net income fell from $5.7 billion to $5.3 billion [3] - The company faced higher costs of sales (up 3.3% year-over-year) and increased operating expenses (up 6.5% year-over-year), attributed to growing e-commerce sales [4] - Walmart's e-commerce sales now account for 18% of net sales, which are more costly than traditional stores [4] Capital Allocation - Walmart returns approximately half of its profits to shareholders through dividends and share repurchases [5] - The company has a strong dividend history, being a "Dividend King" with a recent 13% increase in its quarterly payout to $0.235 per share, resulting in an annual yield of 1.1% [6] - In fiscal year 2025, Walmart allocated $4.5 billion to share repurchases, with $12 billion remaining under its current repurchase program [7] Growth Drivers - Management believes that membership growth with Walmart+, Sam's Club, and its advertising business will drive future growth [10] - "Membership and other income" segments grew from $5.5 billion in fiscal year 2024 to $6.5 billion in fiscal year 2025, a 17.5% increase [10] - The global advertising segment increased by 27% year-over-year to approximately $4.4 billion [10] Valuation and Debt - Walmart currently trades at a price-to-earnings (P/E) ratio of 35.6, above its five-year median of 31, indicating a premium valuation [12] - The company carries $30 billion in net debt, which cost $2.3 billion to service in fiscal year 2025, although it has reduced net debt by 25% over the past three years [12] - Despite high valuation and sluggish earnings growth, Walmart's dividend longevity makes it a solid long-term hold for income-seeking investors [13]