Walmart Earnings Preview: Can Q2 Results Revive Retail Leader's Stock?

Walmart shares have underperformed in recent months despite consistently outshining its peers over the last few years. The retail leader's stock has gained over +130% in the past five years, surpassing Amazon's +60.8%, Home Depot's +2.1%, and Target's -40.9%. However, Walmart's shares have been down since their May 21st quarterly release, even though it comfortably beat consensus EPS, revenues, and same-store sales estimates.

The company is set to report its Q2 earnings on August 20th, and investors will be watching closely to see if the results can shift sentiment towards Walmart. The retail sector has been facing challenges due to elevated fuel costs, which not only add to consumers' financial burdens but also increase retailers' expenses.

Walmart's premium valuation of 37.6X forward 12-month EPS estimates may be a contributing factor to its recent underperformance. Management's conservative guidance in the May quarterly release has also sparked market concern. Despite these challenges, Walmart remains better positioned than many others in the space due to its value orientation, greater indexing to groceries, and robust digital capabilities.