Financial Report Analysis | Walmart: Revenue and Profits Both Beat Expectations—Why Did Its Stock Price Drop Nearly 6%? — The K-Shaped Divergence Signal from America’s Consumer Barometer

Conclusion: Walmart’s Q2 revenue and EPS both exceeded expectations, yet its U.S. same-store sales growth hit a six-year low and its guidance for the next quarter was weak—causing its stock price to fall 5.9% following the earnings release. What makes this report truly valuable is not the numbers themselves, but the signal they convey: traditional retail is cooling down; consumption among middle- and lower-income Americans is weakening; and growth is now being propped up solely by Walmart’s ‘second growth curve’—e-commerce, advertising, and membership—and by high-income consumers. I. The Numbers: Strong Profits, Slowing Growth | Metric | Value | YoY Change | Commentary | |--------|-------|------------|------------| | Total Revenue | $187.9B | +5.9% (vs. expected $186.8B) | ✅ Beat expectation | | Adjusted EPS | $0.81 | +19.1% (vs. expected +9.3%) | ✅ High-quality earnings | | Adjusted Operating Profit | $9.2B | +17.4% | ✅ | | Net Income | $6.37B | Down (vs. $7.03B last year) | ⚠️ | | U.S. Same-Store Sales | +2.6% | Lowest in nearly six years | 🔴 | Profit growth (17–19%) significantly outpaced revenue growth (5.9%), indicating improvements in cost structure and operations; however, the decline in net income year-on-year and the six-year low in same-store sales clearly signal a weakening growth momentum. II. Growth Engines: What Drove the Beat? 1. E-commerce: Global sales up 23%; now accounts for 24% of total net sales (U.S. e-commerce alone accounts for 23%, double its share five years ago). 2. Advertising: Up 38% (core Connect business up 43%)—a high-margin “retail media network,” representing the true second growth curve. 3. Membership: Walmart+ subscriber growth hit a record high for this time of year; membership fee revenue up 17%. 4. Sam’s Club U.S.: Net sales $25.7B (+8.8%); operating profit up 44.3%—membership warehouses are profit powerhouses. 5. China: Net sales $7.0B (+20.7%), comparable sales +9.7%, e-commerce +26%, online share now at 55%; 67 Sam’s Club locations plus 278 Walmart Supercenters.

The Intelligent Investor – Earnings Per Share vs. Real Earnings

III. The Concept of 'Real Earnings Power' Benjamin Graham introduced the concept of 'Real Earnings Power': the average earnings over a 5–10 year period, calculated under normal operating conditions and excluding one-time items. This is the most reliable metric for assessing a company’s intrinsic value. IV. Why Use a 5–10 Year Average? • A single year’s figure may be distorted by cyclical fluctuations. • Averaging smooths out cyclical volatility. • It also helps identify whether reported earnings are stable and sustainable. V. Case Study: A Common Pitfall A company reports EPS of ¥5 this year versus ¥1 last year—a 400% increase! But upon closer inspection: • Last year was a cyclical trough. • This year includes a one-time ¥2 gain from asset disposal. • After adjustment, real EPS this year is less than ¥3. Graham warned: Never be seduced by seemingly explosive EPS growth—always examine the 5-year average. VI. EPS Traps Across Different Market Phases Graham identified several common 'EPS traps': 1. Bull-Market Trap: High valuation + seemingly rising EPS → actually reflecting a cyclical peak. 2. Restructuring Trap: One-time restructuring gains inflate EPS → followed by subsequent declines. 3. Leverage Trap: Debt-financed share buybacks boost EPS → while financial health deteriorates. 4. Accounting Trap: Changes in depreciation policy artificially lift EPS → without any improvement in cash flow. All four traps share a key feature: EPS rises, yet real earnings remain unchanged—or even decline. VII. Graham-Newman’s Practice When managing his own partnership fund, Graham consistently focused on adjusted earnings—not headline EPS.

Quaker Houghton Q2 Adjusted EPS Beats Estimates at $2.19

Jul 31, 2026

Quaker Houghton exceeded Q2 earnings expectations with $2.19 adjusted EPS and $532.55 million in sales. The company announced a $250 million share repurchase program and increased its quarterly dividend by 4.3%.

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