Up 15% This Year, Will Walmart Stock Rally Further After Q1 Results?

Note: Walmart’s FY’2024 ended in January 2024.

Walmart (NYSE: WMT), the world’s largest retailer (by revenue), operating discount stores, supercenters, neighborhood markets, and Sam’s Club warehouses, is scheduled to report its fiscal first-quarter results on Thursday, May 16. We expect WMT stock to likely trade lower with revenue and earnings marginally missing expectations in fiscal first-quarter results. It should be noted that Walmart owes $46.9 billion in debt and has $9.9 billion in cash position currently. With financing rates significantly higher than in previous years, this significant debt not only increases long-term risk for the retailer but also interest costs. In addition, the company saw slowing U.S. comparable sales growth throughout FY’24. The company saw 7.4% U.S. comp sales growth in Q1’24 followed by 6.4% in Q2’24, 4.9% in Q3’24, and 4.0% in Q4’24. Looking ahead, Walmart sees FY 2025 revenue growth of 3% to 4% year-over-year (y-o-y). The company also expects full-year EPS of $2.23 to $2.37 on a post-split basis. The company announced a 3-to-1 stock split in Feb 2024.

WMT stock has shown strong gains of 35% from levels of $45 in early January 2021 to around $60 now, vs. an increase of about 40% for the S&P 500 over this roughly 3-year period. However, the increase in WMT stock has been far from consistent. Returns for the stock were 2% in 2021, 0% in 2022, and 13% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 – indicating that WMT underperformed the S&P in 2021 and 2023.
In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for other heavyweights in the Consumer Staples sector including PG, COST, and KO, and even for the megacap stars GOOG, TSLA, and MSFT. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could WMT face a similar situation as it did in 2021 and 2023 and underperform the S&P over the next 12 months – or will it see a strong jump?

Our forecast indicates that Walmart’s valuation is $54 per share, almost 11% lower than the current market price. Look at our interactive dashboard analysis on WMT’s Earnings Preview: What To Expect in Q1? for more details.

(1) Revenues expected to be slightly below consensus estimates

Trefis estimates Walmart’s Q1 2025 revenues to be around $156.1 Bil, marginally below the consensus estimate. In Q4, the company’s revenue rose 5.7% y-o-y to $174.4 billion. Walmart’s transactions were 4.3% higher during the quarter and the average ticket was down 0.3%. E-commerce sales rose 23% y-o-y and contributed 240 basis points to comparable sales in the fourth quarter. In addition, WMT’s global advertising business grew approximately 33% during the quarter, including 22% for Walmart Connect in the U.S.  Notably, there was a reduction in deflationary trends (compared to Q3 2024) as food and consumable prices fell less than anticipated. We forecast Walmart’s Revenue to be around $673.7 billion for fiscal 2025, up 4% y-o-y.

2) EPS likely to marginally miss consensus estimates

WMT’s Q1 2025 earnings per share (EPS) is expected to be $0.50 per Trefis analysis, slightly missing the consensus estimate. The retailer’s adjusted EPS came in at $1.80, up 5% y-o-y, due to growth in operating income.

(3) Stock price estimate lower than the current market price

Going by Walmart’s Valuation, with an EPS estimate of around $2.32 and a P/E multiple of 23.4x in fiscal 2025, this translates into a price of $54, which is almost 11% lower than the current market price.

It is helpful to see how its peers stack up. WMT Peers shows how Walmart’s stock compares against peers on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

[1] Returns as of 5/14/2024
[2] Cumulative total returns since the end of 2016