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Walmart is getting ready to release its second-quarter earnings, and analysts from UBS believe the report will show the retail giant is still going strong, even with challenges in the economy.
UBS shared that this earnings report will likely be more about meeting expectations than surprising anyone. But even so, they expect it to prove that Walmart has solid momentum behind it. Areas like groceries, health and wellness products, and online shopping are expected to be especially strong.
The analysts pointed out that this performance could help explain why Walmart’s stock is valued more highly than Amazon’s. One big reason for this is Walmart’s ability to possibly grow its profit margins over time. Even though its operating margin for this year is expected to be around 4.2%, that’s still lower than its 2010 high of 6.1%. But the steady and reliable way the company is growing is keeping investors interested.
UBS said Walmart remains one of its top picks for investors. They called the stock a “core holding,” meaning it’s something worth keeping in a long-term investment portfolio.
However, they don’t think Walmart will increase its full-year profit forecast, which is currently between $2.50 and $2.60 per share. Part of the reason for this caution is related to concerns around new tariffs. Still, UBS believes Walmart is doing a good job of managing its costs and keeping customer demand stable.
One area investors will be watching closely is general merchandise. This part of the business didn’t do very well in the first quarter. UBS said that new product options, including first-party sales of Jordan Brand items and some price changes caused by tariffs, might help improve results this time.
UBS also pointed out that some of Walmart’s most profitable businesses are growing fast. Services like advertising and paid memberships are bringing in more money. In fact, UBS said these parts of the business now make up half of Walmart’s total profit growth, which is a big deal.
Overall, UBS believes Walmart’s second-quarter report will make a strong case for continued growth. They expect the numbers to show Walmart gaining more market share, managing its profits well, and setting itself up for more success in the future.