Walmart Inc (NYSE:WMT, ETR:WMT) is set to report its second quarter earnings this week, with Bank of America analysts expecting the discussion to center less on headline numbers and more on the forces shaping the retailer’s longer-term trajectory.

For Q2, the analysts project adjusted EPS of $0.70 and US comparable sales growth of 3.5% for the quarter, in line with the Wall Street consensus.

However, they noted that recent data implies potential upside, citing stronger-than-expected sales trends during the period.

Looking at Walmart’s long-term prospects, the analysts see the company’s ability to leverage ancillary businesses to improve profitability as a key growth driver.

“We see continued gross margin expansion in Q2 helped by digital advertising & other ancillary businesses,” the analysts wrote.

With US eCommerce profitability achieved last quarter, advertising, data, and fintech are becoming increasingly important.

These businesses have delivered 40% annual growth over the last four years and are projected to drive two-thirds of Walmart’s profit growth in the next several, the analysts noted.

Convenience remains a major differentiator, the analysts believe. Over the past year, Walmart introduced the ability for customers to combine grocery, general merchandise, and pharmacy items in a single order and receive it in less than an hour.

Bank of America said this kind of integration, along with plans to extend same-day delivery coverage to 95% of US households by year-end, underscores how Walmart’s stores continue to provide a key advantage in localized fulfillment, especially in fresh food.

The firm also pointed to Walmart’s ability to navigate trade and inventory challenges. The retailer’s size, supplier relationships, and automation “well position it to manage tariffs,” with the added flexibility of shifting goods between first- and third-party arrangements and a lower overall import exposure than many peers.

On valuation, Bank of America acknowledged Walmart trades at roughly 34 times earnings, near two-decade highs, but argued the premium is warranted.

“We maintain ‘Buy’ on Walmart as share gains continue across product categories and incomes (especially $100k+) as its strong value offering & digital convenience resonate,” the analysts wrote.

Shares of Walmart traded at $101 on Tuesday afternoon, up 12% so far this year.

Author Credits- Emily Jarvie
Proactive