Key Takeaways:
Walmart reported Q2 adjusted EPS of $0.81, beating consensus of $0.74, yet shares fell 9.15% on soft Q3 guidance.
"We think we have a tremendous opportunity to continue to change and see our margins drift up over time," CFO John David Rainey said.
Revenue of $187.94 billion rose 5.94% year over year. Q3 guidance of $0.62 to $0.64 adjusted EPS came in soft as tariff refund benefits get reinvested into price rollbacks. Maximum Fair Pricing regulation is creating a 125 basis point pharmacy headwind to U.S. comparable sales.
Shares trade at $105.09, down 12.03% since May 21 and below both the 50-day moving average of $113.32 and the 200-day at $118.54. The 24/7 Wall St. price target of $120.95 implies 15.17% upside over the next 12 months, with a buy recommendation and 90% model confidence.
High-margin engines re-mix the model
Global e-commerce grew 23%, Walmart U.S. marketplace sales jumped 52%, global advertising rose 38%, and membership fee revenue climbed 17% globally. These businesses are shifting Walmart toward a higher-margin mix that supports a richer multiple. Consensus target sits at $128.43, with 9 Strong Buys, 28 Buys, 5 Holds, and 1 Sell.
The bull case points to $144.50 if margin expansion and share gains accelerate. The bear case lands at $110.26, still above current levels, with higher fuel costs adding over $2 billion in incremental expenses and Maximum Fair Pricing expected to cost 900 basis points in Health & Wellness. Q3 operating income growth is guided to just 2% to 4%.
Peer comparison
Costco's Q3 FY26 revenue rose 11.58% to $70.53 billion, with comparable sales up 9.8%, roughly double Walmart's pace. But Costco's $426.8 billion market cap already prices that scarcity. Target's Q2 FY27 revenue of $26.54 billion grew 5.3%, with adjusted EPS of $4.11 including a $1.65 per share tariff refund windfall. Walmart's forward P/E of 36 looks reasonable given accelerating digital, marketplace, and ad mix.
Management raised full-year guidance across sales, operating income, and EPS in the same report the market punished. The selloff prices in another quarter of margin noise as tariff refunds get reinvested into price rollbacks. Investors will watch whether Maximum Fair Pricing pressure spreads beyond pharmacy, and the Q3 earnings call for updated segment margins.
This article is for informational purposes only and does not constitute investment advice.
