Walmart (WMT) continues to show strong core business trends despite near-term headwinds, with exogenous factors such as higher fuel costs masking underlying bright spots, RBC Capital Markets said in a Thursday note.
Higher fuel costs weighed on near-term margins, but the company's decision to absorb them is supporting competitiveness and market share gains, while strong performance continued across Walmart US, Sam's Club, and international operations, driven by e-commerce growth and improving unit economics, according to the report.
RBC noted that Walmart's guidance of 4% to 5% Q2 constant currency sales growth and adjusted earnings per share of $0.72 to $0.74, and fiscal 2027 sales growth of 3.5% to 4.5% and EPS of $2.75 to $2.85 was below expectations, while highlighting that fuel costs and consumer pressure continue to weigh on near-term profitability assumptions.
Earnings drivers include advertising, membership income, and international growth, with muted inflation and e-commerce initiatives such as faster delivery, marketplace expansion, and AI tools supporting long-term operating leverage, the report added.
RBC maintained its outperform rating on the stock while lowering its price target to $137 from $140.
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