How Will Costco Stock React to Its Fiscal 3Q17 Results?

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How Will Costco Stock React to Its Fiscal 3Q17 Results? PART 1 OF 6

Here’s What Is Driving Costco Stock Higher

Costco outperformed its peers

Costco Wholesale (COST) stock has outperformed the S&P 500 (SPX) and the S&P 500 Consumer Staples Index on a YTD (year-to-date) basis. Moreover, the company has also outpaced Wal-Mart Stores (WMT), Target (TGT), Dollar Tree (DLTR), and Kroger (KR) in terms of price gains.

Costco stock has risen ~11.1% YTD as of May 16. Much of this growth stemmed from the company’s impressive top line performance amid tough operating environment. Despite its challenges, Costco remained successful in driving store traffic through low pricing and a wide variety of product offerings.

Here&#8217;s What Is Driving Costco Stock Higher

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By comparison, Walmart’s and Dollar Tree’s stocks have risen 8.7% and 2.5%, respectively, since the start of 2017. The stock prices of Target and Kroger have fallen 24.5% and 16.5%, respectively, during the same period.

Could Costco’s stock rise further?

As can be seen in the chart above, Costco started the year on a strong note. However, the stock declined soon after the company posted lower-than-expected fiscal 2Q17 results. The company’s profitability suffered during the last quarter on account of lower earnings from fuel, increased promotional activities, and the strong US (SPY) dollar.

However, analysts have remained upbeat and expect most of the company’s challenges to abate in coming quarters. The company successfully generated healthy comps (comparable store sales) growth in the combined nine-week period of March and April 2017 (we’ll discuss this later in the series), which positively impacted its stock price.

Costco is expected to post healthy top- and bottom-line growth in fiscal 3Q17, but whether the company’s stock can keep rising will remain a wait-and-watch story.

Series overview

Costco is set to announce its fiscal 3Q17 results on May 25. In this series, we’ll focus on analysts’ expectations for the company’s earnings and margins. We’ll also examine the company’s valuation and the analyst recommendations for the stock.

Continue to the next part for a look at the analyst projections for Costco’s earnings per share.


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