Walmart 1Q27 fundamentals remain solid, with the key near-term question being whether EBIT growth can sustain momentum

Overview

This report is Bernstein's commentary on Walmart Inc's 1Q27 results. The report argues that WMT's first-quarter revenue outperformed expectations, gross margin and adjusted EPS were broadly in line with consensus, and constant-currency adjusted EBIT growth was materially dragged by fuel costs. Although the company's maintained FY27 and 2Q27 guidance is relatively conservative versus market expectations, the analyst still believes the fundamentals remain intact and that the post-earnings share pullback was somewhat excessive.

Core views

The core view is that WMT's sales momentum, share gains, and e-commerce-driven profit improvement remain intact; near-term EBIT is being weighed down by fuel costs, fulfillment costs, and some expense investment, but growth in retail media, Walmart+ membership, improved delivery and fulfillment efficiency, last year's general liability accrual base, and the low base from Vizio integration costs still provide a path to mid-teens EBIT growth for the full year. If energy inflation persists and weakens consumer purchasing power, WMT could also benefit from trading down thanks to its value positioning.

Analysis framework

The report uses a framework that compares results with consensus, company guidance, and prior expectations, focusing on sales growth, comparable sales, gross margin, adjusted EBIT, adjusted EPS, and segment performance; it then adjusts the earnings model for fuel, foreign exchange, gross margin, SG&A, and debt-repayment pace, and maintains the target price using a P/E multiple approach.

Methodology notes

• 估值P/E multiple method

  Apply a 39.0x P/E multiple to the forward Q5-Q8 EPS estimate of $3.71 to arrive at a 145.00 USD target price.

  This method anchors the target price to future earnings power and the valuation multiple, and the report says both the multiple and the forward EPS estimate are unchanged.

• 业绩拆解Segment and comparable sales analysis

  Break down comparable sales, transaction volume, average ticket, e-commerce contribution, and operating profit by Walmart US, Sam’s Club US, and Walmart International.

  This breakdown is used to determine the source of the revenue beat and whether high-quality growth from e-commerce, membership, and advertising can translate into profit momentum.

• 情景与风险Cost pressure and consumer downtrading framework

  Assess the pressure from fuel inflation on fulfillment and delivery costs while judging the upside for a value retailer in a stressed consumer environment.

  The report treats fuel costs as a short-term EBIT headwind, but if energy inflation suppresses consumers' ability to spend, WMT may capture trading-down demand thanks to its value proposition.

Asset mapping & comparison

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

• WMT.US

  Core coverage name

  Strengths

  Sales growth beat expectations; share gains in the US and international businesses; rapid growth in e-commerce and advertising businesses; and a value proposition that is attractive when consumers are under pressure.

  Weaknesses

  Fuel costs create short-term margin pressure on delivery and fulfillment, and changes in e-commerce mix plus labor/store investments are pushing up some expenses.

  Comparison

  Relative to market consensus, the company's FY27 sales, EBIT, and EPS guidance is conservative; Bernstein believes there is still a path to EBIT growth above guidance.

  Risks

  An unexpectedly weak consumer environment, underperformance in new businesses, and regulatory pressure from Walmart's leading position in US groceries.

• S&P 500

  Relative to benchmark rating

  Strengths

  Bernstein defines Outperform for US-listed stocks as outperforming the market index by more than 15 percentage points over the next 12 months.

  Weaknesses

  If WMT's profit momentum is insufficient or market risk appetite shifts, the high valuation multiple may come under pressure.

  Comparison

  The chart shows WMT and the SPX both rising during 2025-2026, with WMT share performance accompanied by a history of target price increases.

  Risks

  Broad-market valuation swings and the interest-rate/inflation environment could affect comparable valuation multiples.

Key data

• RatingOutperformBernstein maintains an Outperform rating on WMT.
• Target price145.00 USDThe target price is unchanged.
• 1Q27 net salesUS$175.7 billion, up 7.1% YoYConstant-currency net sales grew 5.7%, about 150 bp above consensus.
• 1Q27 adjusted constant-currency EBIT growth5.1%Delivery and fulfillment fuel costs had about a 250 bp negative impact.
• 1Q27 gross margin24.3%In line with consensus, up 10 bp YoY.
• 1Q27 adjusted EPS$0.66In line with consensus.
• Walmart US comparable salesUp 4.1% excluding fuelSlightly above the 4.0% consensus; e-commerce contributed about 530 bp.
• Sam’s Club US comparable salesUp 3.9% excluding fuelAbove the 3.6% consensus; e-commerce grew 23% and contributed about 400 bp.
• Walmart International net salesUp 10.1% in constant currencyAbove the 5.5% consensus; China grew 22.3%, and foreign exchange contributed a $2.3 billion tailwind to sales.
• Global advertising revenueUp 37%Walmart Connect in the US grew 44%.
• FY27 EPS estimate$3.09Lowered from the previous $3.19.
• FY28 EPS estimate$3.60Lowered from the previous $3.71.

Impact & implications

From an investment perspective, the report tends to view the post-quarter pullback as an overreaction. The near-term debate centers on whether fuel costs and expense investment will suppress EBIT delivery, but the medium-term logic remains that WMT can improve its profit structure through e-commerce scale, retail media, membership, and better fulfillment efficiency. Its defensive attributes and consumer-downtrading beneficiary profile also give it relative resilience in an energy-inflation or consumer-stressed environment.

Risks

• An unexpectedly weak consumer environment in the US or major international markets could slow comparable sales and create expense deleverage.
• Failure to execute on new businesses such as e-commerce and advertising could threaten long-term revenue and margin targets.
• Walmart's leading position in the US grocery market may draw greater regulatory scrutiny.
• Persistently high fuel prices could continue to weigh on delivery, fulfillment, and gross margin performance.
• A rising e-commerce mix, along with labor and store investments, could lift SG&A and pressure near-term margins.

What to watch

• Whether 2Q27 constant-currency sales growth guidance of 4.0%-5.0% and EBIT growth guidance of 7.0%-10.0% are met or exceeded.
• Whether fuel-cost pressure eases and how much continued impact it has on delivery and fulfillment costs.
• Whether Walmart US e-commerce contribution, fulfillment/delivery efficiency, and store-level comparable sales improve.
• Whether global advertising revenue and Walmart Connect in the US can sustain high growth.
• Trends in Sam’s Club membership income, Plus membership, and renewal rates.
• Whether growth in Walmart International, especially China, can continue.
• Whether the gap between the company's FY27 adjusted EPS guidance of $2.75-$2.85 and Bernstein's $3.09 estimate can narrow.