Costco's Third Quarter Earnings Preview
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 2 days ago
0mins
Source: Fool
- Revenue Growth Expectations: Analysts anticipate Costco's third-quarter revenue to rise by 10.2% to $69.6 billion, reflecting its ongoing competitiveness in the retail sector despite inflationary pressures.
- Membership Model Advantage: Costco's membership model reduces its sensitivity to macroeconomic conditions, with most profits derived from membership fees, attracting a higher-income customer base that strengthens its market position.
- Comparable Sales Growth: For the four weeks ending May 3, comparable sales adjusted for gas prices and foreign exchange rose by 7.8%, surpassing the 6.5% growth in the first 35 weeks, indicating sustained consumer demand for its offerings.
- Valuation Considerations: While Costco's business remains robust, its price-to-earnings ratio of 52 is significantly higher than its peers, prompting investors to carefully consider entry points to mitigate potential stock price corrections.
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Analyst Views on COST
Wall Street analysts forecast COST stock price to rise
24 Analyst Rating
19 Buy
4 Hold
1 Sell
Strong Buy
Current: 995.200
Low
769.00
Averages
1061
High
1205
Current: 995.200
Low
769.00
Averages
1061
High
1205
About COST
Costco Wholesale Corporation (Costco) operates membership warehouses and e-commerce sites that offer a selection of nationally branded and private-label products in a wide range of categories. The Company buys the majority of its merchandise directly from suppliers and route it to cross-docking consolidation points (depots) or directly to its warehouses. It operates 891 warehouses, including 614 in the United States and Puerto Rico, 108 in Canada, 40 in Mexico, 35 in Japan, 29 in the United Kingdom, 19 in Korea, 15 in Australia, 14 in Taiwan, seven in China, five in Spain, two in France, and one each in Iceland, New Zealand and Sweden. It also operates e-commerce sites in the United States, Canada, the United Kingdom, Mexico, Korea, Taiwan, Japan and Australia. The Company provides wide selection of merchandise, plus the convenience of specialty departments and exclusive member services.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Sales Growth Exceeds Expectations: Costco reported a Q3 comparable sales growth of 9.8%, significantly above the consensus estimate of 7.8%, with gas price inflation contributing approximately 2.2% to this growth.
- Competitive Pricing Advantage: By widening price gaps, Costco ensures attractive pricing for members, reflecting the increased share of gas spending in total member expenditures due to rising prices, thereby reinforcing its market position.
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- Increased Member Loyalty: The high price sensitivity led many members to use Costco's gas stations for the first time in Q3, which not only boosted sales but is expected to enhance member loyalty in the future.
- Sales Growth Exceeds Expectations: Costco reported a Q3 comparable sales growth of 9.8%, significantly above the consensus estimate of 7.8%, with gas price inflation contributing approximately 2.2% to this growth.
- Competitive Pricing Advantage: By widening price gaps, Costco ensures attractive pricing for members, reflecting the increased share of gas spending in total member expenditures due to rising prices, thereby reinforcing its market position.
See More
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- Costco Membership Renewal Rates Up: Costco's latest earnings report showed improved membership renewal rates in the U.S. and Canada; although market reaction was muted, record performance in its gas business is likely to enhance membership loyalty and solidify its market position.
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- Johnson & Johnson Drug Approval: Johnson & Johnson received FDA approval to expand the label for its Tremfya therapy for psoriatic arthritis, which generated $5.2 billion in sales last year, representing nearly 6% of total revenue, and is anticipated to further bolster the company's growth trajectory.
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- Increased AI Revenue Forecast: The company now expects AI revenue to reach $60 billion for 2023, a 20% increase from the previous forecast of $50 billion made in February, reflecting robust market demand and Dell's competitive positioning in the AI sector.
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