S&P 500
7,582.20
+0.03%
Dow Jones
51,018.80
+0.58%
Nasdaq 100
30,344.40
+0.25%
Russell 2000
2,916.31
-0.54%
FTSE 100
0.00
+0.00%
Nikkei 225
66,231.90
+0.67%

Retail

Costco Company Earnings Deliver, but Valuation and Growth Concerns Remain

Photo of Jon C. Ogg
By Jon C. Ogg Published
This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them.

Money, US, $100 bills

Costco Wholesale Corp. (NASDAQ: COST) is holding its own after the company earnings report. Costco’s report was for its third quarter, and investors should know that it is considered to be the throwaway or least contributing quarter of the year. Net income rose about 19% due to strong sales and due to membership fee expansion.

Earnings came to $459 million, or $1.04 in earnings per share, while revenues rose by about 8% to $24.08 billion. Thomson Reuters had estimates at $1.03 per share and $24.23 billion in revenue. Membership fees rose to $531 million from $475 million, and this is considered to be the key driver of Costco’s profits. Same-store sales were also up by an above-market 5% in the quarter, although this was up 6% just on a U.S. reporting basis for domestic stores. If you drop out the gasoline sales and the currency effect, Costco same-store sales would have been up by about 7% in the quarter.

Costco stock options were bracing for a move of about $3.00 in either direction, but the stock is up only almost $1.00 to $113.90, and its recent all-time high was $115.77. Costco shares were about 15% higher so far in 2013 ahead of earnings, and its valuation is about 25 times the expected fiscal 2013 earnings estimate.

The report was good. The question is where Costco will find its growth and whether investors will keep paying up for this large valuation ahead. Analysts had a consensus price target of $109.50 before considering the earnings report.

DISCLOSURE:
INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE Brokerage and Active investing products offered through SoFi Securities LLC, member FINRA(www.finra.org)/SIPC(www.sipc.org). Advisory services are offered by SoFi Wealth LLC, an SEC-registered investment adviser. Information about SoFi Wealth’s advisory operations, services, and fees is set forth in SoFi Wealth’s current Form ADV Part 2 (Brochure), a copy of which is available upon request and at www.adviserinfo.sec.gov. Probability of Member receiving $1,000 is a probability of 0.026%; If you don’t make a selection in 30 days, you’ll no longer qualify for the promo. Customer must fund their account with a minimum of $50.00 to qualify. Other fees, such as exchange fees, may apply. Please view our fee disclosure to view a full listing of fees. Investing in alternative investments and/or strategies may not be suitable for all investors and involves unique risks, including the risk of loss. An investor should consider their individual circumstances and any investment information, such as a prospectus, prior to investing. Interval Funds are illiquid instruments, the ability to trade on your timeline may be restricted. Brokerage and Active investing products offered through SoFi Securities LLC, Member FINRA(www.finra.org) /SIPC(www.sipc.org). There are limitations with fractional shares to consider before investing. During market hours fractional share orders are transmitted immediately in the order received. There may be system delays from receipt of your order until execution and market conditions may adversely impact execution prices. Outside of market hours orders are received on a not held basis and will be aggregated for each security then executed in the morning trade window of the next business day at market open. Share will be delivered at an average price received for executing the securities through a single batched order. Fractional shares may not be transferred to another firm. Fractional shares will be sold when a transfer or closure request is initiated. Please consider that selling securities is a taxable event. Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire investment Before trading options please review the Characteristics and Risks of Standardized Options  Investing in an Initial Public Offering (IPO) involves substantial risk, including the risk of loss. Further, there are a variety of risk factors to consider when investing in an IPO, including but not limited to, unproven management, significant debt, and lack of operating history. For a comprehensive discussion of these risks please refer to SoFi Securities’ IPO Risk Disclosure Statement This should not be considered a recommendation to participate in IPOs and investors should carefully read the offering prospectus to determine whether an offering is consistent with their investment objectives, risk tolerance, and financial situation. New offerings generally have high demand and there are a limited number of shares available for distribution to participants. Many customers may not be allocated shares and share allocations may be significantly smaller than the shares requested in the customer’s initial offer (Indication of Interest). For more information on the allocation process please visit IPO Allocation.
Follow 24/7 Wall St. on Google
Photo of Jon C. Ogg
About the Author Jon C. Ogg →

Jon Ogg has been a financial news analyst since 1997. Mr. Ogg set up one of the first audio squawk box services for traders called TTN, which he sold in 2003. He has previously worked as a licensed broker to some of the top U.S. and E.U. financial institutions, managed capital, and has raised private capital at the seed and venture stage. He has lived in Copenhagen, Denmark, as well as New York and Chicago, and he now lives in Houston, Texas. Jon received a Bachelor of Business Administration in finance at University of Houston in 1992. www.247wallst.com.

Continue Reading

Paul Ausick |

Membership Fees Lift Costco as Revenues Fall Short of Estimates

ThinkstockCostco Wholesale Corp. (NASDAQ: COST) reported first-quarter fiscal 2013 results before markets opened this morning. The big-box club store posted diluted…

Paul Ausick |

Costco: Profits Depend on Membership Fees

ThinkstockCostco Wholesale Corp. (NASDAQ: COST) reported second-quarter fiscal 2013 results before markets opened this morning. The warehouse club retailer reported…

Costco (COST) Earnings Scorecard
Joel South |

Costco (COST) Earnings Scorecard

Costco (NASDAQ:COST | COST Price Prediction) delivered a clean beat on both the top and bottom lines for its fiscal…

Paul Ausick |

Could Costco Earnings Signal a Rise in Membership Fees?

Costco Wholesale reported mixed second-quarter fiscal 2015 results before markets opened Thursday morning.

Why Costco Keeps Beating Profit Estimates
Paul Ausick |

Why Costco Keeps Beating Profit Estimates

Costco reported an earnings beat for its first fiscal quarter last night and shares are trading above the stock's 52-week…

Jon C. Ogg |

Costco Stock Challenges All-Time Highs Ahead of Company Earnings

ThinkstockCostco Wholesale Corp. (NASDAQ: COST) is set to report earnings on Thursday morning, likely before about 95% of the nation…

Chris Lange |

What to Expect From Costco Earnings

Costco Wholesale is scheduled to report its fiscal first-quarter financial results after the markets close on Wednesday.

How Costco Beat Profit Estimates
Paul Ausick |

How Costco Beat Profit Estimates

Costco reported fiscal Q3 earnings that beat estimates, but profits were a bit light.

Costco Earnings Hampered by Rising Costs
Paul Ausick |

Costco Earnings Hampered by Rising Costs

Costco Wholesale reported better-than-expected third-quarter fiscal 2016 results after markets closed on Wednesday.

Top Gaining Stocks

Dell Technologies
DELL • Vol: 42,366,555
NetApp
NTAP • Vol: 15,911,807
ServiceNow
NOW • Vol: 68,243,561
IBM
IBM • Vol: 28,527,546
Hewlett Packard Enterprise
HPE • Vol: 86,996,387

Top Losing Stocks

Coterra Energy
CTRA • Vol: 73,319,495
Clorox
CLX • Vol: 4,744,001
ResMed
RMD • Vol: 3,526,686
Intel
INTC • Vol: 191,680,425
Skyworks Solutions
SWKS • Vol: 5,407,806