Walmart’s Q2 print should support the bull case: UBS

Investing.com -- Walmart’s upcoming second-quarter earnings are likely to reinforce its bullish investment case, according to UBS analysts, who say the retailer continues to demonstrate "underlying momentum" despite economic headwinds.

“We believe WMT’s upcoming 2Q print will be about ‘checking the boxes’ above all else,” UBS wrote in a note.

The bank added that the “results are likely to show that WMT’s underlying momentum remains strong,” particularly in areas like grocery, health and wellness, and e-commerce.

UBS said the earnings report should help justify Walmart’s valuation premium over Amazon (NASDAQ: AMZN), noting the company’s “unique opportunity for significant margin expansion” and its consistent financial performance.

Walmart (NYSE: WMT) is expected to post an enterprise operating margin of 4.2% this year, still below its 2010 peak of 6.1%.

Nevertheless, UBS views the stock as “a core holding.”

The analysts don’t expect Walmart to meaningfully raise its full-year EPS guidance of $2.50–$2.60, due in part to optics around tariffs.

Still, they believe the company will show it is managing costs effectively and maintaining steady demand.

General merchandise performance, where Walmart had a slightly negative comp in the first quarter, will be a key focus.

UBS said tariff-related price increases and catalog expansion, including new first-party sales of Jordan Brand products, could lift results.

UBS also highlighted the strength of Walmart’s high-margin businesses like advertising and membership, saying these alternative profit streams now account for half of the company’s profit growth.

Overall, UBS believes the Q2 print will “reinforce the key elements of the bull case,” including market share gains and margin expansion opportunities.

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