Walmart WMT 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 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.
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