Walmart (NYSE:WMT), the retail grocery giant, reports their fiscal Q4 ’25 financial results before the opening bell on February 20, 2025.
Consensus expectations for America’s retail giant are for $0.53 in EPS, $180.2 billion in revenue and $6.8 billion in operating income, for expected y-o-y growth of -12%, +4% and -6%. Walmart faces a tough compare with fiscal Q4 ’24 when revenue grew +5.5%, operating income grew 13% and EPS grew 5% y-o-y. Comp’s grew +8% in Q1 ’24 while Sam’s comped +12% for same-store sales.
In fiscal Q3 ’25 (last quarter), Walmart grew revenue by 5%, operating income by 11% and EPS by +14%. General Merchandise “inflected” positively in Q3 ’25 (probably the first time in a few quarters) as positive components were accompanied by expense leverage, and the overall operating margin rose 10 bp’s to 4.7%. Sam’s contributed too to the fiscal Q3 ’25 good results.
As it stands today, Walmart’s fiscal 2026 consensus is expecting $707.8 billion in revenue, and $2.75 in earnings per share (EPS) for expected y-o-y growth of 4% and 10% respectively.
Let’s see how management guides for Q1 ’26 and full-year fiscal ’26 revenue and EPS. (Walmart is one of those strange retailers where – despite 11 months of results being in calendar 2024 – the fiscal year is 2025 since the last month of Walmart’s fiscal year is January. I can see how this is confusing for retail investors.)
Don’t forget too, the US still has a very strong US consumer.
Valuation
What’s been interesting for me as an analyst watching Walmart’s valuation data quarter-in and quarter-out, is that – like Costco (NASDAQ:COST) – Walmart’s “price-to-sales” (or price-to-revenue metric) has traded below 1x for 89 straight quarters, and it’s only been the last 2 quarters for Walmart that price-to-sales (and this blog uses price to trailing-twelve-month (TTM) revenue) has been over 1x, at exactly 1x last quarter, and if revenue consensus is met, will trade 1.22x Thursday morning, February 20, 2025.
Costco has been the same way: it traded below 1x TTM revenue for 85 straight quarters, which ended with Covid when COST traded above 1x TTM revenue during the work-from-home and stay-at-home crunch, then slipped back below 1x after 2022, and finally moved back above 1x TTM revenue in the August ’23 quarter.
Both Walmart and Costco have spent the vast majority of the last 25 years trading under 1x TTM revenue, until just recently.
Wall Street talks a lot about “PE expansion” but the fact is investors in both these stocks are seeing broad “revenue multiple expansion” for the big-box giants, and naturally being the analyst geek that I am at heart, the first question is always, “Why now ?”
If Walmart hits consensus revenue, it will trade at 1.22x revenue later this week, while Costco is now trading at a whopping 1.9x TTM revenue as of Friday’s close.
Morningstar has a $58 fair value on the stock, which might be too conservative if Walmart can grow the operating margin, the way the business model evolution might be suggesting it can.
This blog has an $85 – $90 “fair value” estimate on Walmart, based on current EPS estimates.
On a PE basis, trading at $104 per share, Walmart is trading at roughly 33x – 35x expected fiscal ’26 to fiscal ’28 EPS, for expected growth over that 3-year span of 11%. While the stock isn’t cheap on a PE basis, it does trade a little lower on a cash-flow multiple basis with WMT valued at 15x TTM cash-flow and 30x TTM free-cash-flow. Walmart’s PE multiple alone expanded from 25X in fiscal Q1 ’24 to 41X if the EPS number is hit for Q4 ’24 on Thursday morning, February 20, 2025, so yes there has been PE expansion in the stock, and yes, the stock could use a correction.
Walmart’s quality of earnings is pretty solid: 3 of the last 5 quarters have seen Walmart cash-flow-from-ops (CFO), cover net income by 200% and free-cash-flow (FCF) has covered net income by 100% half of the last 20 quarters.
The inventory backlog that occurred after COVID-19 – the big over-ordering from China and domestically – really impacted earnings quality for 6 – 7 quarters, severely hampering the cash-flow data, across the entire retail sector, but Walmart specifically too.
Don’t kid yourself, Walmart’s ability to move merchandise in and out of the supply chain from supplier to customer is really critical to Walmart’s cash-flow health.
Margins (Finally)
Ultimately, I believe Walmart is a margin expansion story. When management announced in April 2023, that the grocery giant was going to rationalize supply-chain expenses and continue to bring down the cost of merchandising grocery and general merchandise goods for their customers, the stock started to rally and hasn’t really stopped much since. (Per the November ’24 conference call notes, the supply chain savings are about 50% complete, according to management.) Investors who had been waiting years for Walmart to break out of this long consolidation realized that Walmart being an AI beneficiary (according to Jeffries Corey Tarlowe ) and the further pressure on supply chain expenses, would likely make Walmart a beneficiary of the AI boom.
The other contributor to better operating margins is the so-called “flywheel” or growth in “alternative revenue streams” which Walmart seems to be keeping a pretty tight lid on, but these alternative revenue streams also are likely to generate higher operating margins than the grocery and general merchandising retail sales businesses.
In the November ’24 conference call notes, Walmart talked about “as our business model evolves, it’s encouraging to see our margins improve from a diverse set of offerings.” Those diverse offerings now include global e-commerce, Walmart’s global advertising business and Marketplace and Walmart Fulfillment Services, the latter two being business segments I’m less familiar with.
E-commerce: Walmart Is Moving Forward
E-commerce needs to be mentioned since it’s not yet a profitable delivery mechanism at Walmart, although e-commerce is becoming less unprofitable, and – if you listen to management on the conference calls – it seems like management posturing indicates the non-US e-commerce initiatives are more successful than the domestic e-commerce operations.
You can tell Walmart is still grappling with the e-commerce product: I use it here in the western suburbs of Chicago and order roughly $75 – $100 per month in (mainly) perishables. Personally, I don’t like having to select the tip for the order, since it’s never really something I need in a hurry (Walmart’s comment about their 1 -3 hour delivery service: ”in addition, the popularity of expedited delivery, has resulted in more than 30% of orders coming from customers and members that elected to pay a convenience fee to receive their delivery in less than 1 hour, or less than 3 hours.)
Perhaps it’s just a personal preference, but I’d rather Walmart just give me one flat price (including delivery to my home) for an order, and then upon arrival, I usually tip the delivery person anyway. For some reason,n I was bumped up to Walmart+, which was designed to have the person come in the home, which doesn’t seemingly require me to select a tip, but for which I tip anyway, and I still don’t know why that happened.
Personally, I’d much prefer the Amazon-style purchase and delivery where the product is paid for, and the price includes delivery, which seems much simpler.
The point of this whole segment was to point out to readers that Walmart’s e-commerce is not yet profitable, but seems to be growing as a percentage of total store revenue, but it’s still a work-in-process, as it becomes less unprofitable.
It will be interesting to hear or read when management says they expect e-commerce to break even or even become profitable.
Conclusion
Walmart and Amazon (NASDAQ:AMZN) are moving closer to each other in terms of business models, as Walmart moves ever-closer to get a viable e-commerce product, while Amazon has the physical stores with the Whole Foods acquisition, although it’s unlikely that Amazon’s physical stores will ever be a threat to Walmart’s grocery business.
Walmart and Amazon are both expected to print $700 billion in sales in calendar 2025, (which is Walmart’s fiscal ’26), but Amazon will probably overtake Walmart this year in total revenue, since their end of your consensus revenue estimate is $769 billion currently, while Walmart’s current fiscal ’26 revenue estimate is $708 billion.
Where I think Walmart’s opportunity lies is margin expansion over the next few years, with both the flywheel of the “alternative revenue streams” management speaks about, which are all likely higher margin than the core grocery and general merchandise business, so as Walmart gives up the title of the #1 ranking in the S&P 500 for annual revenue growth, the stock might not care since operating margins should grow, and maybe grow nicely.
Walmart’s stock rose 73% in calendar ’24 and is up another 15% YTD after 6 weeks of calendar ’25 market action. I’d love to see the stock pull back to the 50-day moving average near $95 or the early January ’25 lows near $90.
The stock is a 2% holding within client accounts and a top 10 holding. I’d love to see the stock correct 10% – 20%.
Here are a few articles written on Walmart over the last few years:
Walmart Earnings Preview: Fighting Back After 20 Years of Margin Erosion
Walmart Trades to New All-Time-High Before Amazon
Walmart and Cisco Earnings Summaries: A New Walmart Could Be At Hand
Disclaimer: None of this is advice or a recommendation but only an opinion. Past performance is no guarantee of future results. All EPS and revenue data is sourced from LSEG. None of the above information may be updated, or if its updated may not be done in a reasonable timeframe.
Thanks for reading.