Costco’s (COST) bottom line has grown briskly. Its EPS have grown at a double-digit percentage rate in the past seven quarters, at an average of 17.3%. Stellar comps growth and a lower effective tax rate have driven the bottom-line growth, and pricing investments have limited it. Analysts expect Costco’ EPS to sustain their momentum and grow 19.0% year-over-year to $1.69 in fiscal 2019’s second quarter.
Peers’ comps and lower effective tax rates also drove their bottom lines. Walmart’s (WMT) performance was impressive in fiscal 2019 and its bottom line grew by an impressive 6% in its last reported quarter, surpassing analysts’ estimates. Meanwhile, Target’s (TGT) bottom line has recorded stellar growth in the past three quarters. Analysts expect Target’s bottom line to grow ~11% in fiscal 2018’s fourth quarter.
EPS growth drivers
Costco’s sustained comps growth is projected to boost its bottom line. Higher membership fee income, overhead savings, and a significantly lower effective tax rate have also driven its earnings growth. However, margin pressure from pricing investments has limited its bottom-line growth. Walmart’s and Target’s weak margins have also affected their bottom-line growth.