Walmart Earnings: Strong Year Capped by Continued Market Share Gains

Key Morningstar Metrics for Walmart

• Fair Value Estimate: $58.00
• Morningstar Rating: ★
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: Medium

What We Thought of Walmart’s Earnings

We plan to modestly raise our value estimate of $58 per share for Walmart WMT following its strong fiscal 2025 fourth-quarter earnings, as we expect the firm to increase profits faster than sales for the foreseeable future. Results closely aligned with our forecast, as the retailer’s low prices and convenient omnichannel offerings translated into continued share gains in its domestic market. Double-digit growth in high-margin profit streams such as advertising and membership income helped drive a robust 10% increase in adjusted earnings per share to $0.66 (slightly below our $0.68 estimate).

Despite Walmart’s continued outperformance relative to the retail industry, investors pushed shares down about 6% during intraday trading on Feb. 20. We believe that underwhelming guidance for fiscal 2026 was the primary culprit for the selloff, as management expects EPS to land in a range of $2.50-$2.60 next year, below our $2.76 estimate. We remain optimistic about Walmart’s ability to increase market share and expand margins in the longer term (we forecast a midcycle operating margin of about 5.5%, up from 4.4% in fiscal 2025), but continue to view shares, trading around 38 times next year’s expected earnings, as overvalued.

Comparable sales at Walmart US expanded 4.6% (in line with our forecast), from growth in transaction count and average ticket. Consistent with previous quarters, the grocery, health, and wellness categories drove the bulk of the gains. We were also pleased to see modest growth in general merchandise sales despite management citing price deflation across the category.

Results at Sam’s Club remained enviable, as comparable sales growth of 6.8% mainly stemmed from increased transactions. Membership income grew 13% due to new-member growth and higher premium tier penetration. We expect the warehouse club channel to outperform the broader retail industry and forecast 4%-5% comparable sales growth at Sam’s Club over the next couple of years.