Will Costco Stock Rise More after Its Fiscal 1Q18 Results?
Analysts project strong 1Q18
Costco (COST) will announce its fiscal 1Q18 results on December 14 after the market closes. Analysts expect the company to report strong top and bottom-line growth. Costco’s top line is expected to benefit from improved comps across all of the regions due to higher store traffic and a rise in the average transaction size. Besides, healthy membership fee income and square footage expansion on a YoY (year-over-year) basis are expected to drive its sales higher. The company’s net sales were impacted positively by the calendar shift in pre-Thanksgiving and Black Friday weekend sales to fiscal 1Q18.
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Analysts expect Costco’s EPS (earnings per share) to register double-digit growth in 1Q18, which sets it apart from its peers. For example, Walmart (WMT) continues to dominate the retail space. So far, it has impressed investors with its stellar performance this year. However, the company’s bottom-line growth rate remains significantly below Costco. Target (TGT) is expected to report a YoY decline in its EPS, which reflects price investment and growing fulfillment costs.
Costco’s EPS is expected to benefit from higher sales and increased membership fee income. Increased cost savings should support the growth initiatives without impacting the margins a considerable amount. However, the company’s profitability will likely be impacted by value pricing and increased business investments aimed at strengthening the digital arm.
Costco’s stock performance
Costco stock was battered following the combination of Amazon (AMZN) and Whole Foods. Analysts remained skeptical about the company’s prospects. However, Costco stock rebounded and is trading close its record high of $191.22 due to its stellar monthly sales numbers.
Costco stock has risen 22.0% on a YTD (year-to-date) basis and has outperformed the S&P 500 (SPX), which has risen 17.5%. However, the company lags Walmart stock, which has grown close to 41.5% on a YTD basis. In contrast, Target stock fell 13.9% during the same period, but it’s witnessing a strong rebound.