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Walmart Beat Earnings and Raised Guidance. So Why Did the Stock Crash?
24/7 Wall St. • • business
Key Points:
- Walmart reported better-than-expected Q2 earnings with adjusted EPS of $0.81 beating consensus and raised its full-year guidance, but its stock fell 9% to $103.84, marking the worst earnings day reaction in ten quarters.
- The gross profit margin improvement was largely driven by tariff refunds, which management plans to reinvest into price rollbacks, leading to softer Q3 guidance with expected lower EPS and sales growth.
- Despite a 29% jump in operating income, Walmart's net income declined 9% year-over-year due to one-time items, and the company repurchased shares at prices significantly above the current stock price.
- Walmart's market reaction contrasted with Target's, which also benefited from tariff refunds but saw its shares rise after reporting, highlighting investor skepticism about Walmart's temporary margin boost and reinvestment strategy.
- The raised guidance was real but came with the caveat that Q2 results were partly borrowed from Q3, signaling potential challenges ahead despite the positive headline numbers.
