HSBC downgrades Walmart rating due to "conservative" full-year outlook

Investing.com - HSBC analysts stated that considering recent consumer spending trends, Walmart’s outlook for this year is “surprisingly weak,” leading to a downgrade of the retail giant’s rating from “Buy” to “Hold.”

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In a report following Walmart’s latest quarterly earnings release, analysts including Joe Thomas and Guilherme Domingues said the company’s performance is “solid,” but guidance is “weak.”

They added that after the earnings call, Walmart executives emphasized the “conservativeness” of this forecast.

HSBC analysts stated: “It’s hard to see a significant deterioration in the trading environment: management indicated they haven’t seen any changes in consumer behavior or key performance indicators.”

However, they pointed out that Walmart’s forecast suggests “near-term momentum may be limited.”

Walmart’s annual earnings forecast fell short of Wall Street expectations, as the company cited “significant uncertainties” across various factors, including currency fluctuations, tariffs, customer spending, and global events.

The Arkansas-based retailer, known for low prices on essential goods, expects adjusted earnings per share of $2.75 to $2.85 for fiscal 2027, compared to Bloomberg consensus of $2.97.

In the first quarter, Walmart expects adjusted earnings per share of $0.63 to $0.65, below Wall Street’s forecast of $0.69.

The company stated in a presentation: “Performance may be significantly affected by many factors, such as foreign exchange rate fluctuations, changes in the global economy and geopolitical situations, tariffs and trade policies, customer demand and spending, inflation, interest rates, world events, and various other factors.”

For the fourth quarter, adjusted earnings per share are expected to be $0.74, with revenue of $190.66 billion. Analysts previously expected $0.73 per share and $190.58 billion in revenue.

The company’s stock price fell on Thursday, causing Walmart’s market capitalization to drop below the recent $1 trillion mark. Nevertheless, the stock has surged over 10% so far this year.

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