Walmart Stock: Despite Missed EPS, Top Investor Says It's a Buy

Walmart reported Q2 FY2026 earnings, with revenues of $177.4 billion, outpacing expectations by $1.27 billion, and year-over-year growth of 5.6% in constant currency. However, EPS of $0.68 missed market projections. Top investor Rick Orford believes Walmart has long-term growth potential due to its scale, digital transformation, and marketplace platform. He notes the company's global advertising business is growing, and e-commerce sales are becoming a primary growth driver.

Walmart Inc. (NYSE: WMT) reported its fiscal Q2 FY2026 earnings on August 21, 2025, with revenues of $177.4 billion, outpacing expectations by $1.27 billion, and year-over-year growth of 5.6% in constant currency. However, earnings per share (EPS) of $0.68 missed market projections by 11%, with the estimate being $0.76 [1].

The company attributed the EPS miss to increased workmen’s compensation and general liability claims, which reduced operating income from a year-over-year (y-o-y) growth of +4.5% to -0.5% [1]. Despite this, Walmart's operational performance remained strong, with key growth areas such as Walmart Connect and Walmart Advertising growing by 31% and 46% respectively, and average ticket and traffic increasing by 1.5% and 3.1% [1].

Top investor Rick Orford believes Walmart has long-term growth potential due to its scale, digital transformation, and marketplace platform. He noted the company's global advertising business is growing, and e-commerce sales are becoming a primary growth driver [1].

Looking ahead, Walmart's forward revenue estimates have improved, while earnings estimates have remained relatively unchanged. The company's 35x earnings multiple for fiscal 2026 is considered overvalued by some investors, but its cash flow from operations (CFFO) is robust, trading at just 18x CFFO/PS compared to the 38x P/E multiple [1].

Walmart's operating margin is expected to improve, with the potential for a 150-basis point increase to 6% if revenue reaches $700 billion. This could lead to a 51% increase in EPS from the trailing twelve-month (TTM) EPS of $2.53 [1].

Overall, while Q2 FY2026 results were mixed, Walmart's long-term growth potential remains intact, driven by its scale, digital transformation, and strong operational performance. Investors should closely monitor the company's progress in these areas as well as its ability to manage one-time expenses and margin pressures.

References:
[1] Seeking Alpha. Walmart Post-Earnings Noisy Quarter: Operationally, Company Fine. Retrieved from https://seekingalpha.com/article/4817706-walmart-post-earnings-noisy-quarter-operationally-company-fine