How Should You Play Walmart Stock Ahead of Q1 Earnings Release?

Core Viewpoint - Walmart Inc. is set to report its first-quarter fiscal 2026 earnings, with expectations of revenue growth but a decline in earnings per share compared to the previous year [1][2]. Financial Performance - The Zacks Consensus Estimate for fiscal first-quarter revenues is $165.6 billion, reflecting a 2.5% increase year-over-year [2]. - The consensus estimate for quarterly earnings has decreased to 57 cents per share, indicating a 5% decline from the same quarter last year [2]. - Walmart has a trailing four-quarter average earnings surprise of 7.4%, with the last quarter's earnings surpassing estimates by 1.5% [2]. Earnings Prediction - The current Earnings ESP for Walmart is -1.76%, and it holds a Zacks Rank of 3 (Hold), suggesting that an earnings beat is not likely this time [3][4]. Business Strengths - Walmart's diversified business model shows consistent contributions across various segments, with increased traffic in both in-store and digital channels [5]. - Growth is driven by expanding e-commerce operations, enhanced pickup options, and accelerated delivery services [5]. - New business ventures, including third-party marketplace and advertising initiatives, are contributing to diversified profit streams [5]. Challenges and Outlook - The company has noted increased week-to-week sales volatility due to economic uncertainty and weakened consumer sentiment [6]. - Walmart anticipates fiscal first-quarter sales growth of 3% to 4%, with a 100 basis point headwind from the leap year comparison [6]. - Adjusted operating income growth is expected to be between 0.5% to 2% at constant currency, with casualty claims expenses being a significant cost pressure [7]. Valuation Analysis - Walmart's stock is trading at a forward P/E ratio of 36.15, above the industry average of 33.29, indicating a relatively expensive valuation [8]. - Compared to other retail giants, Walmart's valuation is significantly higher, raising concerns among value-focused investors [10]. Stock Performance - Over the past three months, Walmart's stock has declined by 8%, underperforming the industry and the S&P 500 [11]. - In comparison, key peers like Kroger and Ross Stores have shown gains, while Target's stock has dropped significantly [11]. Investment Considerations - Walmart's strong business model and growth in high-margin areas position it as a reliable choice for growth-focused investors [13]. - However, short-term challenges such as sales volatility and rising operating expenses may warrant caution for value investors [13].