Will Walmart miss or reduce FY2027 EPS guidance during FY2027?

The Q4 FY2026 update materially reduces this market's probability. With FY27 guidance set at $2.75-$2.85 (above FY26 actual), the first resolution path — initial guidance below FY26 actual — is now fully eliminated. The only remaining path is mid-year reduction. Base rate analysis: companies with 8 consecutive quarterly guidance beats that set initial guidance above the prior year rarely then reduce that guidance. The beat streak has now extended by another quarter, and the execution buffer has grown with SG&A leverage achievement, eCommerce profitability for 4 consecutive quarters, and advertising at $6.4B (+46%). The CFO explicitly characterized guidance as conservative and expressed 'higher level of confidence' relative to prior year.

Focusing on structural margin improvements: the material update shows WMT achieved SG&A leverage for the first time in years (automation-driven), eCommerce profitability expanded from 1 to 4 consecutive quarters with the CFO saying it 'far surpassed breakeven,' and advertising revenue reached $6.4B (+46%). These are high-margin, structurally accretive revenue streams that create a widening buffer against guidance reduction. All 3 segments grew profits faster than sales in Q4. The FY27 OI growth guidance of +6-8% with 'higher level of confidence' from the CFO suggests management sees structural margin tailwinds continuing. For mid-year reduction, you'd need a macro shock severe enough to overwhelm these multiple reinforcing structural tailwinds simultaneously.

Contrarian view: While the update is overwhelmingly positive, several risks persist. The evidence concentration risk noted by Black Swan Beacon remains — the same core data points (now slightly diversified) still anchor the positive thesis. FY27 still has 3-4 quarterly reporting windows where guidance could be reduced. The DEMANDING valuation at 45x+ means management faces implicit pressure to sustain above-guidance performance. If tariff policy escalates significantly (beyond the levels already absorbed) or consumer spending decelerates sharply, the higher-income trade-back-up risk could reduce comp growth below the level needed for operating leverage. The sandbagging pattern also means FY27 guidance may have less buffer than it appears — management may have set guidance closer to their actual internal expectations given the higher base. However, with one resolution path eliminated, this still moves lower than my prior contrarian estimate of 0.22.

The update is as strong as it could be for reducing this market's probability. FY27 guidance is set above FY26 actual, eliminating the first resolution criterion entirely. Management not only beat and raised guidance throughout FY26 but the CFO explicitly said they 'certainly expect' to outperform again. The sandbagging pattern is now an 8-quarter phenomenon with escalating structural drivers: SG&A leverage from automation, eCommerce far surpassing breakeven for 4 quarters, and advertising at $6.4B. CEO transition was the one uncertainty — resolved as a non-event with strategic continuity. The only path remaining is mid-year reduction, which in Walmart's recent history has never occurred. This is a low-probability tail event.

Scenario-based analysis of what could trigger a mid-year guidance reduction (the only remaining path): (1) Severe tariff escalation — WMT absorbed existing tariffs but a major escalation to 40%+ universal tariffs could pierce the buffer. Probability: ~5-8% over FY27. (2) Consumer recession — sharp spending downturn reducing comp growth below 2% for multiple quarters. Probability: ~3-5% over FY27. (3) eCommerce/advertising margin reversal — the 4-quarter profitability trend breaks due to competitive pressure or investment cycle. Probability: ~2-3%. (4) Operational disruption from CEO transition emerging later. Probability: ~1%. These scenarios are partially correlated (tariffs could trigger recession). Combined probability of a shock severe enough AND management choosing to reduce guidance (they could absorb and hold): ~13%.

Calibration against previous prediction: Prior aggregate was 0.18 with the key uncertainty being whether FY27 initial guidance would be set below FY26 actual. That uncertainty is now fully resolved in favor of NO — guidance is above FY26 actual. This eliminates roughly half of the prior probability mass (the first resolution path). The remaining probability was for mid-year reduction, which the update actually makes LESS likely: the execution buffer has expanded (SG&A leverage, advertising +46%, eCommerce profitability sustained), and the CFO expressed higher confidence. A calibrated shift from 0.18 should move to approximately 0.10-0.13. The structural drivers and explicit CFO commentary on conservative guidance argue for the lower end, but maintaining some probability for unknown unknowns over a 4-quarter window argues for 0.12.

Straightforward assessment: FY27 guidance set above FY26 actual eliminates the first resolution path. 8 consecutive beats with management explicitly calling guidance conservative. Only mid-year reduction remains as a path, and WMT has never reduced guidance mid-year during this streak. Advertising at $6.4B and eCommerce profitable for 4 quarters provide expanding structural buffer. Low probability tail event.

Risk-weighted view: While the base case is strongly against a guidance miss, the risk-weighted perspective accounts for tail scenarios over a full year. Tariff escalation beyond current levels, a consumer spending downturn, or a combination of smaller headwinds could force a mid-year reduction. The DEMANDING valuation (45x+) means any deceleration is amplified in market reaction, which could create management pressure to pre-emptively lower expectations. However, Walmart's demonstrated pattern is to absorb shocks and maintain or raise guidance rather than reduce. The expanded structural buffer from advertising and eCommerce profitability provides additional cushion.

Evidence-weighted view: The material update provides 5 new data points that all point in the same direction — lower probability. (1) FY27 guidance above FY26 actual: eliminates first resolution path. (2) CFO explicit conservative characterization: confirms sandbagging continues. (3) SG&A leverage achieved: new structural driver. (4) eCommerce profitability 4 consecutive quarters: no longer a single-quarter anomaly. (5) Advertising $6.4B: high-margin revenue at scale. Zero contradicting signals in the update. All 10 prior signals confirmed with 0 label changes. The evidence weight strongly favors a lower probability estimate.