Walmart 1Q27 revenue beat expectations, but earnings momentum still needs EBIT growth to materialize

Overview

This report is Bernstein's review of Walmart's 1Q27 results. The report argues that WMT delivered strong first-quarter revenue performance, with constant-currency net sales up 5.7%, ahead of prior company guidance; adjusted EBIT rose 5.1%, which was within the guidance range but dragged by about -250 bps from fuel costs in delivery and fulfillment. The company kept FY27 full-year guidance unchanged, and Bernstein continues to view that guidance as conservative, maintaining an Outperform rating and a USD 145.00 target price.

Core views

The core view is that the post-earnings share price decline looks somewhat excessive and WMT's fundamentals remain solid. The near-term market concern is that EBIT growth needs to more clearly support share-price momentum, especially as higher fuel costs pressure margins; however, Bernstein still sees upside from Walmart US e-commerce profitability improvement, retail media growth, lower delivery and fulfillment costs, Walmart+ member growth, and profit leverage as last year's high expense base rolls off. If energy inflation persists and weighs on consumer purchasing power, WMT could benefit from consumer trade-down thanks to its price advantage and value positioning.

Analysis framework

The report combines earnings decomposition, a comparison with company guidance, a comparison against consensus estimates, segment operating analysis, and rolling valuation updates. The analysis focuses on net sales, comparable sales, gross margin, adjusted EBIT, adjusted EPS, and the segment performance of Walmart US, Sam's Club US, and Walmart International, as well as the impact of advertising, e-commerce, foreign exchange, fuel costs, and SG&A investment on earnings forecasts.

Methodology notes

• Valuation methodsP/E multiple valuation

  The target price is based on 39.0x P/E multiplied by forward Q5-Q8 EPS of USD 3.71.

  Bernstein maintains a 39.0x P/E multiple and a USD 145 target price, using forward Q5-Q8 EPS estimates as the valuation base as the model rolls forward.

• Earnings reviewActual results versus consensus estimates/company guidance

  Compare net sales, comparable sales, EBIT, EPS and other metrics against company guidance and market consensus.

  The report notes that first-quarter revenue exceeded prior guidance, Walmart US and Sam's Club US comparable sales were slightly above consensus, and EPS was broadly in line with consensus.

• Segment analysisBusiness segment operating breakdown

  Analyze Walmart US, Sam's Club US, and Walmart International separately.

  The report assesses how transaction volume, basket size, e-commerce contribution, membership income, international market growth, and foreign exchange affect each segment's contribution to group growth and profits.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• WMT.US

  Core coverage name; Bernstein maintains an Outperform rating and a USD 145.00 target price.

  Strengths

  Revenue growth beat expectations, U.S. comparable sales were slightly better than consensus, e-commerce and advertising growth were strong, U.S. Walmart Connect grew 44%, and the company has a value-retail advantage in consumer trade-down scenarios.

  Weaknesses

  Fuel costs dragged EBIT by about -250 bps, brick-and-mortar comparable sales may be weak, gross margin and SG&A are under pressure, and FY27/FY28 EPS forecasts were cut.

  Comparison

  1Q constant-currency net sales grew 5.7%, above prior company guidance of 3.5%-4.5%; Walmart US comparable sales rose 4.1%, slightly above the 4.0% consensus; Walmart International constant-currency sales grew 10.1%, well above the 5.5% consensus.

  Risks

  An unexpected deterioration in the consumer backdrop, failure to execute in e-commerce, advertising and other new businesses, and increased regulatory scrutiny of Walmart's leadership in grocery.

Key data

• 1Q net sales175.7B USD, up 7.1%About 150 bps above consensus; constant-currency net sales grew 5.7%.
• 1Q adjusted EBIT growthUp 5.1% year over year on a constant-currency basisFuel costs in delivery and fulfillment created about a -250 bps drag.
• 1Q adjusted EPS0.66 USDBroadly in line with market consensus.
• Walmart US comparable sales+4.1% (excluding fuel)Slightly above the 4.0% consensus; transaction volume grew 3.0% and average ticket grew 1.0%.
• Walmart US e-commerce contributionAbout 530 bpsDrove comparable sales growth, but also implies negative comparable sales at brick-and-mortar stores.
• Sam's Club US comparable sales+3.9% (excluding fuel)Above the 3.6% consensus; transaction volume grew 6.2% and average ticket fell 2.2%.
• Walmart International constant-currency sales growth+10.1%Above the 5.5% consensus; China grew 22.3%, and foreign exchange provided a USD 2.3B tailwind to sales.
• Global advertising revenue growth+37%Including 44% growth in U.S. Walmart Connect.
• FY27 company guidanceConstant-currency net sales +3.5%-4.5%, adjusted EBIT +6.0%-8.0%, adjusted EPS 2.75-2.85 USDBernstein believes the guidance remains conservative.
• Bernstein EPS forecast revisionFY27 3.09 USD; FY28 3.60 USDPreviously 3.19 USD and 3.71 USD, respectively; the cuts mainly reflect changes in fuel, gross margin, SG&A and other model assumptions.

Impact & implications

From an investment perspective, WMT needs stronger EBIT growth in the near term to support share-price momentum, but the report does not change its positive view. Revenue resilience, market share gains, higher-income consumers trading down, ad growth, and improving e-commerce economics provide medium-term support; fuel costs and other cost pressures are the main near-term drags on earnings elasticity. If the consumer backdrop weakens because of energy inflation, WMT's value positioning could increase its relative defensiveness.

Risks

• An unexpected deterioration in the consumer backdrop in the U.S. or major international markets could slow same-store sales and cause expense deleveraging.
• Execution failures in Walmart's e-commerce, advertising, and other new businesses could threaten long-term revenue and margin targets.
• Regulatory scrutiny of Walmart's leading position in groceries in the U.S. could intensify.
• Persistently high fuel costs could continue to pressure delivery and fulfillment costs and weigh on EBIT growth.
• A higher e-commerce mix, as well as labor and store investment, could create SG&A pressure.

What to watch

• Whether Q2 constant-currency net sales can reach the company's 4.0%-5.0% guidance and come close to or exceed the 5.2% consensus.
• Whether Q2 constant-currency EBIT growth can land in the 7.0%-10.0% range and validate a path to mid-teens full-year EBIT growth.
• Whether fuel cost pressure eases and whether the drag from delivery and fulfillment costs narrows.
• Whether Walmart Connect and global advertising revenue growth can sustain high growth rates.
• Whether Walmart US e-commerce profitability improvement continues to offset pressure from brick-and-mortar comparable sales.
• Whether consumers continue to migrate toward Walmart, especially high-income shoppers and the consumer trade-down trend in an energy-inflation backdrop.