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Will Costco Sustain the Growth Momentum in Q1 2019?


Dec. 5 2018, Published 11:11 a.m. ET

Analysts’ expectations

Costco (COST) is expected to announce its results for the first quarter of fiscal 2019 after the market closes on December 13. Analysts remain upbeat and expect Costco to sustain the sales and earnings growth momentum in the first quarter.

Analysts expect Costco’s top line to mark high single-digit growth due to its industry-leading comps. Costco’s value pricing and expanded offerings will likely drive the traffic and its comps growth rate. Meanwhile, the high membership renewal rate is encouraging.

Costco’s bottom line is projected to grow at a strong double-digit rate due to healthy top-line growth, higher membership fee income, and a lower effective tax rate. However, margins could remain weak due to the company’s investment in price.

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Costco stock performance

Recently, Costco stock corrected. Soft margins and competitive headwinds played spoilsport. Costco’s high valuation was also a concern. Despite the correction, Costco stock has risen 21.6% on a YTD (year-to-date) basis as of December 4. Costco has outperformed its peers and the benchmark index (SPX).

Walmart (WMT) shares have fallen 3.0% on a YTD basis. Target (TGT) stock has risen 6.2% in 2018. The S&P 500 Index has marked ~1.0% growth during the same period.


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