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Will Costco Stock Rise More after Its Fiscal 1Q18 Results?

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Part 2
Will Costco Stock Rise More after Its Fiscal 1Q18 Results? PART 2 OF 6

Costco Could Post Double-Digit Earnings Growth

What analysts expect

Costco (COST) is set to announce its fiscal 1Q18 earnings (period ending November 26, 2017) on December 14. Analysts expect the company to continue to report stellar earnings growth due to higher net sales, a rise in membership fee income, and cost savings from the co-branded Costco Visa card by Citi. Increased profit from gasoline supports the company’s EPS (earnings per share) growth. However, higher investments in growth initiatives are expected to remain a drag.

Wall Street analysts expect Costco’s fiscal 1Q18 earnings to be $1.33 per share—up 13.7% on a YoY (year-over-year) basis.

Costco Could Post Double-Digit Earnings Growth

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Costco outperforms its peers

The above graph shows that Costco has surpassed analysts’ expectations in the past two quarters and has generated a double-digit EPS growth rate. Notably, Costco managed to report strong bottom-line growth at a time when most retailers (XRT) are struggling to increase their profitability due to increased price competition and higher investments.

In comparison, the company’s peers have lagged Costco in terms of bottom-line growth. For instance, Target’s (TGT) fiscal 3Q17 EPS fell 12.5%, which reflects price investments and higher costs related to digital sales. Target’s EPS will likely remain low. Lower pricing and increased digital fulfillment costs are expected to offset the leverage from a slight improvement in sales and productivity savings.

Walmart (WMT) reported improved bottom-line growth due to its strong top-line performance. Walmart’s growth rate is still well below Costco.

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