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Costco (COST) Q1 Earnings: Growth Momentum Likely to Sustain

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Costco Wholesale Corporation (COST - Free Report) is slated to report first-quarter fiscal 2019 results on Dec 13. In the last reported quarter, the company outperformed the Zacks Consensus Estimate by 1%. This Issaquah, WA-based company has outperformed the consensus mark in three of the trailing four quarters. Let’s see how things are shaping up prior to this announcement.

The Zacks Consensus Estimate for the quarter under review is $1.61, reflecting year-over-year increase of roughly 18.4%. We observe that the Zacks Consensus Estimate has decreased by a penny in the past seven days.

Key Factors Influencing Q1

Costco continues to be one of the dominant retail wholesalers based on the breadth and quality of merchandise offered. In fact, the company’s strategy to sell products at heavily discounted prices has helped it to remain on growth track. We believe that the company’s growth strategies, sturdy comparable-store sales (comps) performance and strong membership trends bode well for the stock.

Additionally, a differentiated product range enables Costco to provide an upscale shopping experience for its members, consequently resulting in market share gains and higher sales per square foot.

The company with its November sales results on Dec 6 had informed that net sales for the first quarter of fiscal 2019 grew 10.3% to $34.31 billion. Comps improved 8.8% during the quarter under review, representing an increase of 11%, 2.4% and 4% at the United States, Canada and Other International locations, respectively. This followed an overall comps growth of 9.5% in the preceding quarter.

It is also gradually expanding e-commerce capabilities in the United States, Canada, the U.K., Mexico, Korea and Taiwan. Consequently, comparable e-commerce sales surged 32.3% in the quarter under review.

Certainly, the robust performance indicates that the company’s growth efforts have been fueling traffic across both the online and brick-and-mortar platforms. However, analysts pointed that any incremental investments or aggressive pricing strategy may hurt margins. Moreover, rising SG&A expenses and stiff competition also remain concerns.

Costco Wholesale Corporation Price, Consensus and EPS Surprise
 

Costco Wholesale Corporation Price, Consensus and EPS Surprise | Costco Wholesale Corporation Quote

Model Predicts Higher Probability of Earnings Beat

Our proven model does not conclusively show that Costco is likely to beat estimates this quarter. A stock needs to have both — a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Costco has a Zacks Rank #3 but an Earnings ESP of -0.01%. This makes surprise prediction difficult.

Stocks With Favorable Combination

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Boot Barn Holdings, Inc. (BOOT - Free Report) has an Earnings ESP of +6.85% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Darden Restaurants, Inc. (DRI - Free Report) has an Earnings ESP of +4.40% and a Zacks Rank #2.

Constellation Brands Inc. (STZ - Free Report) has an Earnings ESP of +1.40% and a Zacks Rank #3.

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