Will Walmart Earnings Beat Despite Poor Retail Sales?

The major US retail seller is expected to report solid growth despite the economy cooling in the final quarter, as consumers look for deals amid cost-of-living pressures.

What the Market Is Looking For

• Walmart is expected to report sales up 10% over the last year and earnings of $0.73, after the stock price rose 24% over the last 12 months.
• Traders have boosted the company lately amid a rotation out of tech stocks, as consumers look for bargains amid cost-of-living pressures.
• Investors will be looking at the company's growth targets for 2026 as it ramps up AI investments to deal with rivals like Amazon.

Has Walmart Peaked?

Investors have been bullish on Walmart for months, with the stock up 15% YTD, while the S&P 500 has failed to gain headway. This made it the first retailer to surpass $1 trillion in market cap recently. However, Walmart is a traditional refuge amid troubled economic times as consumers search for bargains, and its outperformance could reflect expectations that US Q4 GDP cooled and inflation remained elevated. This has pushed the company's valuation to 45, above historic levels, and could set a high bar for its Q4 earnings. The stock's performance could also benefit from the ongoing rotation out of software stocks amid investor concerns about AI-related disruption. Rivals Costco and Target have also seen share gains over the last month, but Walmart has outperformed them. Notably, Walmart has outperformed Amazon, the major online retailer whose stock price has dropped after it pledged $200 billion in investment in AI.

Walmart will report earnings on Thursday before the opening bell and is expected to report EPS of $0.73, up from $0.66 a year ago. Sales are projected to rise 10.1% to $185.0 billion. Traders are likely to focus on the company's guidance for the coming year. Traditionally, Walmart offers a modest outlook at the start of the year. Also, this will be the first earnings report for new CEO John Furner, who has been shaking up the company's management style. Traders might also be wary of the company's foray into AI as it tries to compete with its largest rival, Amazon. Last quarter, e-commerce sales grew 27% and are a key target for the company.

A Bright Walmart Amid S&P 500 Gloom?

If Walmart manages to outperform expectations, it would set itself apart from other retailers, after reports that US consumers scaled back spending in the crucial holiday month of December. Retail sales were unchanged amid cost-of-living challenges, which might benefit budget-friendly alternatives like Walmart at the expense of other S&P 500 components. The benchmark stock market has failed to take off this year, as persistently high inflation and hawkish policymakers make it increasingly unlikely that the Fed will ease rates until at least May, when Trump's pick to replace Powell comes on board.

SPX500 Bounce Brings into Focus  iH&S

Despite struggling to revisit record highs above the 7k handle, the S&P 500 has found support at 6775, which coincides with the lower VWAP line, after dropping on Tuesday. This level also appears to be at the same point prices dropped in late January, bringing into focus a potential inverse head-and-shoulders pattern. However, short-term resistance at the medium VWAP of 6890 is holding bulls off from further upside towards the psychological resistance. If the data dump reinforces the Fed’s hawkish views, the index could lose the pattern support (head support) at 6730, opening the door to 6700 next.

Source: SpreadEx | SPX 500, Daily Chart