What to Expect From Costco Earnings

September 29, 2016 by Chris Lange

Costco Wholesale Corp. (NASDAQ: COST) is scheduled to report its fiscal fourth-quarter financial results after the markets close on Thursday. The consensus estimates from Thomson Reuters are calling for $1.73 in earnings per share (EPS) on $36.81 billion in revenue. The same period of last year reportedly had EPS of $1.73 and $35.78 billion in revenue.

Costco raised its minimum wage for store employees to $13 an hour beginning in March, and that very likely contributed to the higher SG&A total for the third quarter. Keep in mind, though, that SG&A is less than a tenth the company’s merchandise costs. In March, Costco estimated the impact of higher employee wages at about one cent per share in the third quarter and about two cents a share in each of the next three quarters.

There is a reasonable chance that Costco will raise its membership fees early in 2017, if not a little sooner. In 2011 the company boosted its basic fee by $5, and since then membership renewals have been running at around 85% to 90%. A similarly sized increase is not likely to send customers fleeing. Costco’s new credit card deal with Visa also could help boost memberships.

A few analysts weighed in on Costco ahead of earnings:

  • Cowen reiterated an Outperform rating with a $170 price target.
  • Robert Baird has a Buy rating and a $175 price target.
  • Barclays has an Equal Weight rating with a $158 price target.
  • Jefferies reiterated a Hold rating.
  • Piper Jaffray reiterated an Overweight rating.
  • BMO Capital Markets reiterated an Outperform rating with a $180 price target.
  • Guggenheim reiterated a Neutral rating.
  • Nomura reiterated a Buy rating with a $185 price target.
  • Citigroup has a Neutral rating.
  • JPMorgan reiterated a Buy rating with a $179 price target.

So far in 2016, Costco has underperformed the broad markets, with the stock down nearly 7%. Over the past 52 weeks, the stock is up about 5%.

Shares of Costco closed Wednesday at $149.41, with a consensus analyst price target of $169.38 and a 52-week trading range of $138.57 to $169.73.

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