The Zacks Analyst Blog Highlights Walmart, Kroger, Target and Costco

For Immediate ReleaseChicago, IL – February 24, 2025 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Walmart Inc. WMT, Kroger KR, Target TGT and Costco COST.Here are highlights from Friday’s Analyst Blog:WMT Stocks Down -6.5% on Q4 Results: What's Next for Investors?Walmart Inc. saw its shares decline 6.5% on Thursday following its fourth-quarter fiscal 2025 earnings release. While the company’s top and bottom lines grew year over year and beat expectations, management’s cautious guidance for fiscal 2026, cost pressures and concerns over macroeconomic uncertainties that could weigh on consumer spending seem to have pulled the company’s stock price down.WMT’s Cautious GuidanceWalmart has been operating in a highly dynamic environment. On its fourth-quarter earnings call, the company anticipated that this trend would continue in the coming year. Management’s outlook assumes a relatively stable macroeconomic backdrop but acknowledges lingering uncertainties related to consumer behavior, global economic conditions and geopolitical factors.Walmart’s sales growth is expected to slow in fiscal 2026, with the company guiding for 3-4% consolidated net sales growth, suggesting a deceleration from the 5.6% growth in fiscal 2025. This slowdown is partly due to lapping strong prior-year performance, making it harder for the company to maintain the same level of momentum. Also, the leap year impact is expected to lower sales growth by about 100 bps.Apart from this, Walmart’s operating expenses deleveraged 46 bps in the fourth quarter, mainly due to higher variable pay, rising utilities and marketing costs. In addition, the Vizio acquisition’s integration costs created a drag on operating income. The persistence of cost pressures, coupled with continued price investments to maintain market share, may weigh on the near-term margins.Walmart expects adjusted EPS for fiscal 2026 to be in the $2.50-$2.60 range compared with the adjusted EPS of $2.51 in fiscal 2025. Moreover, Walmart’s first-quarter operating income is expected to grow just 0.5-2%, much below its full-year forecast of 3.5-5.5% growth, signaling near-term cost pressures. The company expects first-quarter adjusted EPS to be in the range of 57-58 cents, suggesting a decline from the 60 cents recorded in the first quarter of fiscal 2025.Volatile Currency Movements: A Challenge for WMTAdverse foreign exchange fluctuations remain a persistent challenge for Walmart due to its significant international exposure. In the fourth quarter alone, currency fluctuations reduced reported sales by more than $2 billion, illustrating the ongoing volatility in global markets. The company noted that if current exchange rates persist, it would create a 100-basis point (bps) headwind to sales growth and a 150 bps drag on operating income for fiscal 2026. Currency headwinds are expected to create a 150 bps headwind to sales growth and a 250 bps impact on operating income growth in the first quarter.Walmart’s Long-term Prospects StrongWhile short-term challenges spooked the market, Walmart’s long-term growth trajectory remains intact, driven by its omnichannel expansion, e-commerce profitability and strategic investments in automation and advertising. Walmart’s solid international operations in key regions such as Mexico (Walmex), India (Flipkart and PhonePe) and China are also vital components of its long-term growth strategy.Walmart's omnichannel advantage remains a key differentiator, with 93% of U.S. households now covered by same-day delivery. This allows customers to seamlessly switch between in-store shopping, curbside pickup and online delivery, strengthening engagement. Retail giants such as Kroger, Target and Costco are also advancing in omnichannel strategies, underscoring the industry’s pivot toward this model.E-commerce is a major growth driver for Walmart, which witnessed a 16% rise in global e-commerce sales during the fourth quarter of fiscal 2025. E-commerce now contributes 18% of total sales, up 1,100 bps since fiscal 2020, driven by the concretion of delivery routes, express delivery adoption and improved fulfillment economics.Walmart's push into high-margin businesses is also yielding strong results. The company’s advertising revenues surged 27% to roughly $4.4 billion in the fourth quarter, driven by Walmart Connect and international ad growth. Global membership income grew 21% to nearly $3.8 billion, with Sam’s Club US membership up 12% and Walmart+ membership showing double-digit growth. These businesses are expected to be among the largest contributors to operating income growth over the next few years, helping Walmart expand margins while supporting investments in core retail.WMT’s Impressive Past Performance, Rich ValuationConstant growth endeavors and strong fundamentals have helped Walmart shares soar 66.3% over the past year, outpacing the broader Zacks Retail – Wholesale sector’s increase of 27.8% and the S&P 500’s growth of 21.8%.The company also trades above its 50 and 200-day moving averages, signaling strong upward momentum and price stability. The moving average is an important indicator for gauging market trends and momentum. This technical strength indicates positive market sentiment and confidence in the company's financial health and prospects.Walmart is currently trading at a forward 12-month price-to-earnings (P/E) ratio of 35.2, which exceeds the industry average of 34.44. This premium valuation underscores the market’s confidence in the company’s long-term growth potential and resilience. Investors are willing to pay a higher multiple for the company because of its robust business model, consistent performance and ability to navigate challenging macroeconomic conditions.How to Play Walmart Stock?While Walmart’s stock declined on near-term concerns, its long-term strategic positioning remains compelling. The company is successfully transitioning from a traditional retailer to a digital-first, omnichannel powerhouse. With a focus on higher-margin businesses like advertising, fulfillment services and automation, this retail giant has the potential to drive sustainable growth.Though short-term headwinds exist, Walmart’s ability to adapt and innovate makes it a resilient retail leader poised for success. Potential investors might want to wait it out, while current investors with a long-term horizon should stay invested. WMT currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Why Haven't You Looked at Zacks' Top Stocks?Since 2000, our top stock-picking strategies have blown away the S&P's +7.7% average gain per year. Amazingly, they soared with average gains of +48.4%, +50.2% and +56.7% per year.Today you can access their live picks without cost or obligation.See Stocks Free >>Zacks Investment Research800-767-3771 ext. 9339support@zacks.comhttps://www.zacks.comPast performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. 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(KR): Free Stock Analysis Report Costco Wholesale Corporation (COST): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks