Walmart (WMT) fiscal Q1 will see a "modest upside" to Wall Street's expectation despite near-term tariff uncertainty, however full year outlook may reflect a broader range of potential outcomes, Morgan Stanley said in a report Tuesday.

The company holds competitive advantages in scale, supply chain efficiency, category mix and pricing that make it one of the best retailers to manage these challenges and disruptions, according to the firm.

Morgan Stanley said US comparable store sales will exceed the consensus driven by improving consumer trends, strong grocery demand and higher Walmart+ membership.

Several non-recurring pressures, such as casualty claims, leap year comparison and Vizio consolidation, will drag on fiscal Q1 margins, but eCommerce profitability is improving, the firm added.

Morgan Stanley has an overweight rating on Walmart's stock with a $115 price target.

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