Costco (COST) earnings: a limited upside?

7:37 pm ET, 11 Dec 2018

Costco Wholesale Corporation (COST) shares are trading at $226.50, up 2%. The company is announcing its quarterly earnings results on Thursday after the market close. What's driving Costco stock price? What's COST stock price forecast?

Costco Wholesale Corporation operates membership warehouses. Lately, the stock has performed well: it generated a return of 20% in the past year. The company’s November comparable sales were up 9.2%.

Investors are showing interest in the company because of its differentiated business model.  On the other hand, a few bearish investors feel that the stock is overvalued now.  At $226.50 a share, Costco is currently trading at 17x FY18 cash flow and 35x free cash flow, which isn't cheap.  However, a 9.2% comp in US retail is quite a good number.  

Last quarter’s revenue rose 5.0% to $44.41 billion and earnings per share came at $2.36 compared to $2.08 for the same period last year.

First-quarter fiscal year 2019 results will be released after market close on December 13, 2018.  Analysts expect the company to earn $1.61 per share on revenue of $34.79 billion.  The company beat analysts’ estimates in the previous four quarters.

What is the sentiment towards the Costco stock? Our technical analysis shows that: 

  • The stock short-term sentiment (next 30 days) is trending positive;
  • The mid-term sentiment (3-6 months) is trending positive;
  • The long-term sentiment (9-12 months) is trending positive.

Over the last month, Costco Wholesale Corporation (COST) returned -1.66%.

Costco Wholesale Corporation (COST) forward P/E ratio is 27.4, and it’s high compared to its industry peers’ P/E ratios.

Costco Wholesale Corporation (COST) average analyst price target ($243.08) is 7.39% above its current price ($226.35).

For the latest price and information on Costco Wholesale Corporation, please visit Finstead and search for "COST price" or "COST news".

Costco (COST): trending positive, despite the competition from Amazon

4:26 pm ET, 04 Oct 2018

Costco Wholesale Corporation (COST) shares are trading at $225.71. The company is announcing its quarterly earnings results on Thursday after the market close. What's driving COST stock price? What's COST stock price forecast?

Costco Wholesale operates membership warehouses globally. Lately, the stock has performed well; it yielded a return of 43% in the past year.

Investors are buying the shares as the company is fundamentally strong. On the other hand, some investors feel that the company will face tough competition from Amazon. Last quarter’s revenue rose 12% to $31.59 billion and earnings per share came at $1.70 compared to $1.59 for the same period last year.

The fourth-quarter results will be released after market close on October 04, 2018. Analysts expect the company to earn $2.36 per share on revenue of $44.26 billion. The company beat analyst estimates in the previous four quarters.

What is the sentiment towards the COST stock? Our technical analysis shows that:

  • The stock short-term sentiment (next 30 days) is trending positive;
  • The mid-term sentiment (3-6 months) is trending positive;
  • The long-term sentiment (9-12 months) is trending positive. 

Over the last month, Costco Wholesale Corporation (COST) returned +2.72%.

Costco Wholesale Corporation (COST) forward P/E ratio is 30.45, and it's high compared to its industry peers' P/E ratios.

Costco Wholesale Corporation (COST) average analyst price target ($227.63) is -3.04% below its current price ($234.76).

For the latest price and information on Costco Wholesale Corporation, please visit Finstead and search for "COST price" or "COST news".

Costco Wholesale Corporation (COST) Stock Guide

Updated at: 2:50 pm ET, 17 Sep 2020

Before we start: if you're looking for COST stock price, you can quickly find it out by visiting Finny and typing "COST quote". If you're looking for a quick scoop on COST stock (chart, price target, market cap, news and buy or sell analysis), go to Finny and look for "COST". You'll get all this info in one place. Or you can just type "COST news" to get the latest stock news.

Looking to buy or sell Costco Wholesale Corporation (COST)? Interested in getting the full scoop on COST, including earnings and dividends, stock forecast, buy or sell analysis and key stats? If so, you came to the right place.

In this COST stock guide, we'll address key questions about COST, above and beyond what you can find on Yahoo Finance, Zacks, MarketWatch or Morningstar.

Here is what you'll be able to find in this guide:

Earnings and Dividends: earnings, earnings date, dividend rate and dividend yield;
Analyst Predictions: stock forecast and analyst ratings;
Analysis: Finny Score and buy or sell analysis;
Key Stats: revenue, market cap, revenue growth, profit margin, P/E ratio, P/B ratio, industry, sector, and number of employees.

And here is the list of questions we'll answer:
1. What are COST earnings?
2. What is COST dividend?
3. What is COST dividend yield?
4. What is COST stock forecast (i.e., prediction)?
5. COST buy or sell? What is COST Finny Score?
6. What are the reasons to buy COST? Why should I buy COST stock?
7. What are the reasons to sell COST? Why should I sell COST stock?
8. What are COST key stats: revenue, market cap, revenue growth, profit margin, P/E ratio, P/B ratio industry, sector, and number of employees?

So let's start. Scroll down to the question that interests you the most.

Earnings and Dividends

1. What are COST earnings?

COST trailing 12-month earnings per share (EPS) is $8.36.

2. What is COST dividend?

COST forward dividend is $2.80.

3. What is COST dividend yield?

COST forward dividend yield is 0.81%.

Analyst Predictions

4. What is COST stock forecast (i.e., prediction)?

Based on COST analyst price targets, COST stock forecast is $350.33 (for a year from now). That means the average analyst price target for COST stock is $350.33. The prediction is based on 29 analyst estimates.

The low price target for COST is $235.00, while the high price target is $410.00.

COST analyst rating is Buy.

Analysis

5. COST buy or sell? What is COST Finny Score?

#{finnyScore:57}Our quantitative analysis shows 4 reasons to buy and 3 reasons to sell COST, resulting in Finny Score of 57.

6. What are the reasons to buy COST? Why should I buy COST stock?

Here are the reasons to buy COST stock:

  • Costco sells goods at one of the lowest markups among retailers, which should continue to drive market share gains over time as customers continue to seek out value.
  • Costco has become a one-stop shop for consumers, offering general merchandise, grocery, as well as fuel, which is sold as a loss leader to drive traffic.
  • Annual membership retention is about 90%, which we believe increases visibility into its future cash flows for both the company and investors.
  • Costco’s top and bottom lines continue to register double-digit growth year over year during second-quarter fiscal 2018 as well, thanks to growth strategies, increase in membership fees and sturdy e-commerce sales.
  • We believe that Costco continues to be one of the dominant retail wholesalers based on the breadth and quality of merchandise offered. The company’s strategy to sell products at heavily discounted prices has helped it to remain on a growth track as cash-strapped customers continue to reckon Costco as a viable option for low-cost necessities. A differentiated product range enables Costco to provide an upscale shopping experience for its members, resulting in market share gains and higher sales per square foot.
  • Costco continues to make prudent use of its cash flow through share repurchases and dividend payments. During the second quarter of fiscal 2018, the company bought back shares worth of $59 million. The company had repurchased shares worth of $473 million in fiscal 2017, $477 million in fiscal 2016, $493 million in fiscal 2015 and $333 million in fiscal 2014.
  • We are also encouraged by the company’s expansion strategy. Costco has one of the highest square footage growth in the industry, and remains committed to opening new clubs in the domestic and international markets. In our view, the company’s diversification strategy is a natural hedge against risks that may arise in specific markets.
  • COST quarterly revenue growth was 7.30%, higher than the industry and sector average revenue growth (3.29% and 1.12%, respectively). See COST revenue growth chart.
  • COST profitability is improving. The YoY profit margin change was 0.14 percentage points. See COST profitability chart.
  • COST average analyst rating is Buy. See COST analyst rating chart.
  • COST cash to debt ratio is 0.94, higher than the average industry (0.20) and sector (0.11) cash to debt ratio. See COST cash to debt chart.

7. What are the reasons to sell COST? Why should I sell COST stock?

Let's look at the reasons to sell COST stock (i.e., the bear case):

  • Given its 90 million cardholders today, further penetration of warehouse locations could begin to slow, particularly in the U.S.
  • The majority of the items Costco sells are bulk, which may not resonate as well with untapped consumer segments, particularly as people choose to delay the age at which they have children and opt to live in smaller, urban locations.
  • New club openings in existing markets could lead to cannibalization of sales from older locations. Further, securing suitable real estate options for 140,000-square-foot warehouse clubs can be a challenge in urban areas.
  • Considering price-to-earnings (P/E) ratio, Costco looks pretty overvalued when compared with the industry as well as the S&P 500.
  • Costco faces stiff competition from BJ’s Wholesale Club and Sam’s Club, a division of Wal-Mart Stores. These two rivals follow similar business models as they market high volumes of merchandise at low prices in a membership-only warehouse clubs. Sam’s Club, in particular, poses the biggest threat to Costco as both primarily target professionals and small-business owners who typically make bulk purchases. Analysts pointed that any incremental investments or aggressive pricing strategy may hurt margins.
  • The company’s customers are very sensitive to macroeconomic factors including interest rate hikes, increase in fuel and energy costs, sluggishness in the housing market, unemployment levels, and high household debt levels, which may affect their spending levels. Moreover, due to exposure to international markets, Costco remains prone to currency fluctuations. The strong U.S. dollar may adversely affect the results.
  • COST forward P/E ratio is 37.54, which is high compared to its industry peers’ P/E ratios. See COST forward P/E ratio chart.
  • COST Price/Book ratio is 9.23, which is high compared to its industry peers’ P/B ratios. See COST forward Price/Book ratio chart.
  • COST PEG ratio (P/E adjusted for growth) is 5.69, which is high compared to its industry peers’ PEG ratios. See COST PEG chart.

Key Stats

8. What are COST key stats : revenue, market cap, revenue growth, profit margin, P/E ratio, P/B ratio industry, sector, and number of employees?

Let's look at the key statistics for COST:

Metrics COST
Price $344.38
Average Price Target / Upside $350.33 / 1.73%
Average Analyst Rating Buy
Forward Dividend Yield 0.81%
Industry Discount Stores
Sector Consumer Defensive
Number of Employees 245,000
Market Cap $155.14B
Forward P/E Ratio 37.54
Price/Book Ratio 0.96
Revenue (TTM) $160.88B
YoY Quarterly Revenue Growth 7.30%
Profit Margin 2.31%

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