2Q26 Earnings Updates: Part Two – NXST, LLY, DIS, HD, WMT
Nexstar Media Group (NXST) reported a solid 2Q26 that was overshadowed by the ongoing litigation about the acquisition of Tegna that closed last year. Nexstar owns Tegna and has access to its cash flow, but it cannot yet integrate the stations because of a preliminary injunction obtained by several state attorneys general and DirecTV, which are seeking to block and ultimately reverse the acquisition. The legal process could run well into 2027.
For now, though, the underlying businesses of Nexstar and Tegna are performing well enough for NXST shares to work while a larger payoff awaits if NXST wins or settles the lawsuit as we expect. Political advertising is the driver this year and is running stronger than expected. Distribution revenue remains resilient despite cord cutting, and Nexstar repaid more than $400 million of debt during the quarter. Even without access to Tegna synergies, management expects more than $1 billion of debt reduction through year-end, which shifts value from debt holders to shareholders.
The key question from here is how much incremental cash flow will NXST be able to access from Tegna. The stock may remain in the recent $180-$200 trading range while investors wait for more clarity on the litigation and normalized earnings. We view the shares as undervalued and see substantial upside from continued debt reduction, full TEGNA synergies, spectrum monetization, and a return to share repurchases late in 2027 as acquisition debt is paid down.
Eli Lilly (LLY) reported a very strong 2Q26, led once again by its obesity and diabetes drugs, Mounjaro and Zepbound. Demand remains strong in the U.S. and is growing even faster overseas. Lilly continues to gain share worldwide as its drugs have best in class efficacy. The company raised the full-year sales and profit margin outlook, reinforcing our view that investors continue to underestimate the size and duration of the obesity opportunity.
The second quarter revealed that lower pricing has not hurt the overall business nearly as much as investors feared. Lower prices are driving demand to more than offset those price declines, while better manufacturing efficiency thought greater scale is helping margins. Medicare coverage for obesity drugs began expanding in July, which should bring even more patients in the US.
Foundayo, Lilly’s new oral obesity drug, had a slower start than initially hoped, but the latest trends are improving as insurance coverage expands and more doctors are comfortable prescribing it. We still think the oral market can become an important new source of growth. Lilly has protected its obesity franchise through future generations of drugs. Retatrutide, Lilly’s next-generation injectable, recently reported strong clinical results, although its regulatory filing is now expected in early 2027 rather than later this year.
We remain constructive on LLY. Earnings estimates continue to rise, which helps support the stock’s premium valuation, but expectations are also high and execution will need to remain strong. Over the next several months, the stock will likely be driven by continued prescription growth, Foundayo adoption, and pipeline updates. Longer term, we believe Lilly is building a much broader obesity franchise that can support strong growth well beyond the current Mounjaro and Zepbound cycle.
Disney (DIS) had a good fiscal 3Q26 driven by theme parks and streaming, the two businesses most important to the investor debate. Theme parks are the company’s biggest business. Despite fears driven By Comcast’s recent announcement of slowing attendance at its newly updated Universal park in Orlando, attendance and spending at Disney’s U.S. parks grew above expectations. This also helped ease concerns that higher prices and a challenged consumer would hurt demand.
Streaming is moving in the right direction too. Disney+ and Hulu remain profitable, and management noted subscriber growth and lower churn. Margins have reached double digits and management hinted at further upside. He strategy is to consolidate subscribers at Disney+ by integrating Hulu and ESPN and proving an entry point to other Disney services.
There were still a few weak spots this quarter. Sports profits were hurt by higher rights costs, streaming advertising softened in an uncertain economy, and a couple of recent movies fell short of expectations. Encouragingly, management kept its outlook for double-digit earnings growth through 2027.
We continue to view Disney shares favorably. Our 2026 target is now $125, based on 18 times this year’s earnings estimates. The stock reacted well to earnings and has shown follow through since the report last month. If Disney keeps executing, confidence in the new CEO will grow and the P-E multiple will expand, potentially driving the stock north of $150.
Home Depot (HD) performed as well as could be expected in 2Q26 given a still weak housing market. Comparable stores sales and earnings were better than expected, with broad strength across the business. Professional customers continued to outperform do-it-yourself customers, and SRS, the company’s building-products distribution business, showed encouraging improvement. Home Depot is gaining market share even though high mortgage rates and low home sales continue to hold back larger remodeling projects.
Gross margin remains a key focus for investors. A large tariff refund boosted second-quarter profitability, but management explained that the benefit will be used to absorb higher fuel, energy, and product costs over the rest of the year. The stock initially rose on the comp and earnings beats but reversed sharply when investors worried that the margin beat was temporary due to the tariff refund. Management clarified that the refund should not create an earnings problem next year thanks to continued focus on productivity and cost controls. Until housing turnover and remodeling improves, margins are likely to matter more to the stock than a modest improvement in sales.
The quarter supported our thesis that Home Depot is improving its competitive position, especially with professional contractors, while the long-awaited housing recovery remains delayed. Customers are spending on smaller projects, but larger projects that require financing remain weak due to high mortgage and home equity rates.
Good execution and slightly improving sales gives us more confidence that the shares can recover toward $400. Moving higher will require lower mortgage rates, improved consumer confidence, more housing activity, stronger customer traffic, and a return of larger remodeling projects. In other words, the larger long-term opportunity depends on the housing cycle finally improving.
Walmart (WMT) F2Q27 results were better than the headline sales figure and stock reaction suggested. Comparable sales increased 2.6%, but growth was 3.4% excluding a pharmacy reimbursement change that reduced the reported result. Grocery remained healthy, general merchandise showed modest growth, and the company continued gaining share with higher-income households. Newer revenue streams are also becoming more important growth drivers. E-commerce sales increased 24%, while advertising and marketplace revenue grew even faster and membership revenue rose 17%.
Walmart’s newer businesses are increasingly contributing to profitability. Adjusted operating income grew substantially faster than sales, even after accounting for a temporary tariff-related benefit. Walmart’s stores now serve as a nationwide fulfillment network, handling roughly 80% of its U.S. online orders and supporting faster delivery. Anecdotally, Walmart offered to deliver a replacement for Steve’s broken Roku within two hours for $5 on a weeknight evening from a store 25 miles away. Advertising, marketplace commissions and membership fees provide higher margin revenue that should gradually improve the economics of the overall business. We believe this combination increasingly distinguishes Walmart from a traditional retailer and supports a premium valuation.
The quarter did increase scrutiny around legitimate questions for the stock. Management is investing much of its recent cost benefit in lower prices, and fiscal 2028 comparisons could become more difficult as the tariff-related benefit is not recurring. The shares remain expensive, so management’s outlook for the rest of this year must prove accurate or conservative. We see a path to a $120–$135 valuation range if earnings track toward our expectations, based on approximately 40 times next year’s earnings estimates. The stock may need time to regain momentum as investors wait for better comparable-sales results and clearer fiscal 2028 guidance, but over the longer term we expect Walmart’s operating execution and increasingly technology-enabled business model to drive the shares higher.
