Retail

What to Expect From Costco Earnings

Costco store
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Costco Wholesale Corp. (NASDAQ: COST) is scheduled to report its fiscal fourth quarter financial results after the markets close on Tuesday. The consensus estimates from Thomson Reuters call for $1.66 in earnings per share (EPS) on $36.33 billion in revenue. The same period from the previous year had $1.58 in EPS on $35.52 billion in revenue.

This company has become the ultimate destination for the American consumer regardless of the economy. Costco has a unique business model. It operates membership warehouses, where the company buys the majority of its merchandise directly from manufacturers, essentially cutting out the middleman. Costco sells in bulk but also at a lower price, thus fueling its rapid growth. With consumers having more free cash to spend as gasoline prices have dropped, this major retailer may continue to see large revenue gains.

Costco remains one of the few conventional retailers with metrics like store traffic, market share gains and a validated model that could bode well in international growth and expansion. The company is largely unharmed by e-commerce and continues to add stores at strategically mapped out locations.

For the year that ended on August 31, Costco posted same-store sales that rose 7%. That makes it the envy of Walmart at one end of the spectrum and companies like Macy’s at the other. Costco’s revenue for the year was up 3% to $113.7 billion. The figures seem mundane against those of e-commerce giant Amazon. However, Costco fights a ground war in brick-and-mortar retail, primarily, which is crowded with desperate competition that will do nearly anything to hold eroding sales, and a market share battle that is part of a zero sum game.

A few analysts weighed in on Costco ahead of its earnings:

  • Piper Jaffray reiterated a Buy rating with a $154 price target.
  • Sterne Agee CRT reiterated a Buy rating with a $154 price target.
  • BMO Capital Markets reiterated an Outperform rating with a $165 price target.
  • Deutsche Bank reiterated a Hold rating with a $143 price target.

So far in 2015 shares of Costco have outperformed the market with the stock up nearly 7% year to date, and up nearly 21% over the past 52-weeks.

Shares of Costco were down 1.3% at $143.62 on Monday afternoon. The stock has a consensus analyst price target of $155.22 and a 52-week trading range of $117.03 to $156.85.

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