What to Expect From Costco Earnings

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Costco Wholesale Corp. (NASDAQ: COST) is scheduled to release its fiscal second-quarter financial results after the markets close on Thursday. The consensus estimates from Thomson Reuters call for $1.36 in earnings per share (EPS) and $29.86 billion in revenue. The same period of last year reportedly had EPS of $1.24 and $28.17 billion in revenue.

Industry research firm Retail Metrics recently announced that it estimates Costco’s February same-store sales year-over-year gain at 4% and a gain of 2.9% excluding gasoline sales.

Wells Fargo saw improvement across most categories, and deflation less of a headwind. January strength was led by sequential improvement in hardlines and food categories. Food and sundries were up low-single digits, as deli and food improvement offset tobacco declines of 19% year over year. Hardlines sales were up high-single digits (versus mid-single digits in December) while softlines category sales were up mid-single digits.

Despite continued deflation, fresh foods were up mid-single digits, led by stronger volumes in meat, produce and deli categories. Deflation remains across the business but was less of an overall headwind, primarily impacting food and electronics categories, while nuts, proteins and oils returned to inflation.

Macquarie was one of the first analysts out of the gate with a Neutral rating. The firm actually commented at the very beginning of February:

Costco January comparable-store sales posted strong results, crushing consensus estimates. Headline and core comps accelerated to 7% and 5%, respectively, as traffic growth strengthened to just over 4%, and are a welcome departure from the consistently sluggish U.S. core comps over the previous seven months but are not so quick to think this is the new run rate. Clear and known catalyst remain (windfall from the new Citi Visa credit card arrangement, potential membership fee increase) and are more than adequately reflected in the current valuation (well above 5- and 10-year averages).

A few other analysts weighed in on Costco ahead of the earnings report:

  • Baird has a Buy rating with a $200 price target.
  • Barclays has a Hold rating with a $158 price target.
  • Susquehanna initiated a Positive rating with a $195 price target.
  • Bernstein initiated a Market Perform rating with a $170 price target.
  • Credit Suisse reiterated a Buy rating with a $175 price target.
  • Wells Fargo reiterated a Hold rating.
  • Guggenheim reiterated a Neutral rating.
  • Stifel has a Buy rating with a $185 price target.
  • Oppenheimer reiterated an Outperform rating and raised its price target to $185 from $175.

So far in 2017, Costco has outperformed the broad markets, with the stock up nearly 11%. Over the past 52 weeks, the stock is up 17%.

Shares of Costco were trading at $177.31 on Thursday, with a consensus analyst price target of $178.81 and a 52-week trading range of $138.57 to $178.71.