Walmart punished for disappointing results forecast

The biggest hike in Walmart Inc (NYSE:WMT)’s dividend in over a decade was today overshadowed by cautious guidance as the retailer’s shares suffered their worst performance since the end of 2023.

The New York-listed stock set the latest in a series of record highs earlier this month, but fell 6% in today’s dealings after the midpoint of Walmart’s estimate for earnings in the current financial year came in 8% short of the consensus.

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Morgan Stanley said the high bar going into the annual results meant the shares were always at risk of falling back. It said the stock is due a breather but that the story is not likely to change.

The bank added: “Walmart’s position as share gainer via its scale, technology and supply chain remain intact. We do not think the Walmart narrative will change after today's results.”

The shares rose more than 80% in the year to last night’s close, including a gain of more than 15% in 2025 so far to leave Walmart in record territory and on a multiple of about 37 times forward earnings.

Source: TradingView. Past performance is not a guide to future performance.

A focus on the AI-fuelled growth of mega-cap stocks such as NVIDIA Corp (NASDAQ:NVDA) and Microsoft Corp (NASDAQ:MSFT) means Walmart’s ascent has gone largely unnoticed among UK retail investors. In 2024, Walmart failed to feature among the top 50 most-bought US stocks on the interactive investor platform.

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That’s despite America’s biggest grocery chain boasting a strong record of earnings and dividend momentum since joining the stock market in October 1970.

In today’s results, the group increased the annual dividend for the 52nd consecutive year and by the most in over a decade. Finance chief John David Rainey said the increase of 13% to 94 US cents a share was a sign of our “continued confidence in sustained business performance”.

The dividend will be paid in four quarterly instalments of 23.5 US cents starting on 7 April followed by late May, September and early January.

The award comes after 2024 revenues rose by an underlying 5.6% to $681 billion (£539.4 billion) and adjusted earnings lifted 13% to $2.51 a share.

Guidance for the 2025-26 financial year points to revenues growth of 3-4% and an earnings figure of between $2.50 and $2.60 as Walmart takes a cautious stance amid a backdrop of tariffs uncertainty and slower-than-expected pace of US interest rate cuts.

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The first-quarter estimate of $0.57-$0.58 compares with the $0.66 recorded in the previous quarter, which chief executive Doug McMillon said represented another strong result.

He added: “We have momentum driven by our low prices, a growing assortment and an eCommerce business driven by faster delivery times. We’re gaining market share, our top line is healthy and we’re in great shape with inventory.”

Morgan Stanley, which has a price target of $115, said the results had to meaningfully exceed elevated expectations for the recent share price momentum to continue.

It added: “While we were prepared for a conservative, below-consensus, guide, the totality of the fourth quarter not beating and a more subdued 2026 initial outlook means the stock is due for a breather.”

The setback has come during an otherwise positive results season, with S&P 500 index fourth-quarter earnings pointing to the strongest year-of-year growth since the end of 2021.