Walmart Inc.

(New York Stock Exchange)
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Bullish +75

Walmart set for robust Q1 report as e-commerce growth offsets weaker physical store sales

AI-generated analysis

πŸ“ˆ UBS expects Walmart to deliver robust Q1 earnings with high alignment between investor expectations and likely results.

πŸ“¦ US comparable sales are forecasted to rise around 4.5%, driven by over 25% growth in e-commerce.

πŸ“‰ Physical store sales face pressure from softer health/wellness trends and legislative impact on pharmacy business.

πŸ’° Operating income for both US and international segments is expected to land at the upper end of long-term targets.

πŸ”’ Sam's Club earnings are anticipated to be flat year-over-year due to tougher comparisons with prior periods.

πŸ‘€ Investors are debating whether to incorporate roughly $0.03 EPS upside into full-year guidance amidst macroeconomic uncertainty.

β›½ Rising gasoline prices are estimated to weigh on Q1 EBIT by 10 basis points and could add $200 million in expenses quarterly if sustained.

πŸ’Ή The stock trades at $131 with significant gains, though UBS notes the premium valuation remains a key investment debate.

πŸ“Š Walmart is expected to report first quarter earnings on May 21, potentially validating its resilience in a challenging retail environment.

πŸš€ Longer-term growth hinges on scaling the "second profit and loss" stream via alternative revenue streams like advertising.

πŸ›’ Merchandising improvements and third-party marketplace expansion are helping attract higher-income consumers.

πŸ“‰ E-commerce investments show early signs of margin inflection and scaling alternative revenue channels to drive medium-term growth.

βš–οΈ Walmart's pricing power is expected to support market share gains while absorbing or passing through cost pressures.

Bullish Signals
  • Walmart is expected to deliver another robust quarterly performance with US comparable sales increase of around 4.5%, driven primarily by more than 25% growth in e-commerce.
  • Despite headwinds, UBS expects Walmart's US segment to generate operating income growth at the high end of the company's 6% to 8% long-term target range.
  • The international business is also expected to land at the upper end of the 6% to 8% operating income growth range, reflecting steady underlying profitability trends across key markets.
  • Walmart appears increasingly well-positioned to scale its 'second profit and loss' stream through growing traction with higher-income consumers, merchandising improvements, and expansion of its third-party marketplace.
  • The company is showing improving returns in e-commerce investments with early signs of margin inflection and scaling of alternative revenue streams such as advertising and marketplace services.
  • Walmart's pricing power combined with its ability to maintain value leadership while absorbing or passing through cost pressures could support additional market share gains.
  • Walmart's stock has already performed strongly in 2026, trading up almost 18% so far at $131 per share.
Risk Factors
  • Softer trends in health and wellness categories are expected to negatively impact physical store sales performance.
  • The pharmacy business faces pressure due to Maximum Fair Pricing legislation and slower-than-anticipated adoption of oral GLP-1 therapies.
  • Sam's Club is expected to report flat year-over-year earnings due to tougher comparisons from prior periods.
  • Uncertainty exists over whether Walmart will incorporate potential first-quarter EPS upside of roughly $0.03 into its full-year outlook or reiterate prior guidance amid macroeconomic uncertainty.
  • Sustained elevated oil prices could add approximately $200 million in quarterly expenses, acting as a wildcard that could negatively affect margins.
  • Walmart's premium valuation remains the most debated aspect of the investment case, with limited likelihood of a meaningful re-rating despite robust results.
Full Analysis
Analysts at UBS anticipate Walmart (WMT) will post another strong quarterly performance, expecting US comparable sales to rise approximately 4.5% as robust e-commerce expansion outweighs softer physical store traffic. The bank projects that US same-store growth will be driven by more than 25% online volume gains, partially offset by declines in health and wellness segments and pharmacy pressures due to state maximum fair pricing laws and slower adoption of GLP-1 weight-loss drugs. Despite these headwinds, UBS forecasts operating income for the US segment to reach the upper end of Walmart’s 6% to 8% long-term growth targets, with international units also projected to perform well on steady profitability trends. Sam’s Club earnings are expected to remain relatively flat due to tough comparisons from prior periods. Regarding guidance and capital allocation, UBS notes investors are weighing whether management will incorporate roughly $0.03 of potential first-quarter EPS upside into its full-year outlook or simply reiterate current guidance amid macroeconomic uncertainty. The bank favors an updated forward outlook but acknowledges some caution in the market. Energy costs are flagged as a variable; recent higher gasoline prices weighed on EBIT by about 10 basis points, and UBS estimates sustained elevated oil prices could add approximately $200 million to quarterly expenses. Walmart is scheduled to report its Q1 earnings results on May 21. In terms of valuation and long-term strategy, UBS notes that while stock price appreciation has been significant with shares trading at $131 and up nearly 18% in early 2026, the premium valuation remains the primary debate point, making an immediate meaningful re-rating unlikely. However, the bank maintains Walmart should remain a core holding due to its resilience in a challenging retail environment and sector-setting capabilities. The longer-term investment case hinges on scaling the "second profit and loss" stream from higher-income consumers, supported by merchandising improvements, marketplace expansion, and trade-in initiatives. UBS highlights improving returns on e-commerce investments and margin inflections driven by advertising and marketplace services, expecting these to fuel medium-term earnings growth. Walmart’s pricing power is also expected to allow it to maintain value leadership while absorbing or passing through cost pressures to capture additional market share, with Q1 results set to validate this argument.