By Sabrina Escobar

Walmart's run over the past year has been nothing short of extraordinary.

The stock wrapped up 2024 as one of the top performers in the Dow Jones Industrial Average, and has carried that momentum into the new year. As Barron's pointed out earlier this month, the stock needs to go up about 20% to reach the $1 trillion market capitalization milestone.

The retailer's fiscal fourth-quarter earnings report, due Thursday morning, is the stock's next test -- and it won't be an easy one to ace.

Walmart stock has consistently traded at or above its 50-day moving average for more than a year, said Jay Woods, chief global strategist, Freedom Capital Markets. Heading into earnings, Walmart shares traded at 37.3 times next year's earnings, close to its five-year high of 37.9 times. The stock has gained 14% this year, and about 80% in the past 12 months.

"So for it to jump higher may take one heck of a beat," Woods added. But in past quarters, the company has delivered just that. Walmart stock has traded higher after the last four reports, and after eight of the last 10, he noted.

Wall Street predicts Walmart's sales rose by 3.9% year over year to $180 billion in the quarter, which typically ends in January, according to FactSet. Adjusted earnings are projected to clock in at 65 cents per share. In the year-ago quarter, Walmart's earnings were 60 cents a share.

Analysts are confident Walmart's results will meet the bar. Results from other retailers suggest that holiday spending was robust, and Walmart was well positioned to capture a good chunk of those consumer dollars.

"Walmart outperformed broader retail in the 2024 holiday season," wrote Joseph Feldman, an analyst at Telsey Advisory Group. The company's ongoing market share gains in its grocery business -- coupled with its investments in selective promotions and price cuts, store remodels, and e-commerce -- likely helped it become a go-to holiday destination across income cohorts, he added.

But investors know all that. A bigger uncertainty heading into the report is the company's outlook for the new fiscal year. As the world's largest retailer (and arguably, one of the more profitable ones), Walmart's guidance will be closely scrutinized for clues about what to expect from the consumer environment in 2025.

The consensus among analysts is that Walmart will likely strike a conservative tone to kick off the year, reflecting the industry's uncertainty over the broader consumer environment in the U.S., and how the Trump administration's new policies -- such as tariffs -- will affect the economy.

Greg Melich, an analyst at Evercore ISI, expects management will guide for full-year sales to increase around 3% to 4% year over year, roughly in line with consensus estimates.

Profit should grow at a faster clip than revenue, executives have said in the past, as the company reaps the benefits of its investments in automation and alternative profit streams, such as advertising. Indeed, investors will likely be itching to hear more from Walmart about how these initiatives will flow through to the bottom line. Morgan Stanley analyst Simeon Gutman, for instance, projects that Walmart's Ebit (earnings before interest and taxes) margins could grow by up to 15% annually through 2027, which the company could choose to reinvest or use to grow earnings.

"While we have a solid understanding of the margin structure of WMT's alternative revenue drivers, our instinct is there may be more operating leverage than what the market appreciates," he wrote in a Tuesday note.

Write to Sabrina Escobar at sabrina.escobar@barrons.com

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February 19, 2025 16:15 ET (21:15 GMT)

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