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Costco (COST) Lined Up for Q2 Earnings: Factors to Note

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Costco Wholesale Corporation (COST - Free Report) is likely to register an increase in the top line when it reports second-quarter fiscal 2023 results on Mar 2 after the closing bell. The Zacks Consensus Estimate for revenues is pegged at $55.64 billion, indicating growth of 7.2% from the prior-year reported figure.

The bottom line of this Issaquah, WA-based company is anticipated to have improved year over year. The Zacks Consensus Estimate for second-quarter earnings per share has risen by a penny to $3.21 over the past 30 days and suggests an increase of 9.9% from the year-ago period.

We expect revenues to increase 5.4% year over year to $54,684.1 million and the bottom line to increase 5.3% to $3.07 per share.

Costco has a trailing four-quarter earnings surprise of 3.7%, on average. In the last reported quarter, the company’s bottom line missed the Zacks Consensus Estimate by 1.3%.

Key Factors to Consider

Costco’s growth strategies, better price management, decent membership trends and the increasing penetration of the e-commerce business have been contributing to its upbeat performance. The company’s strategy to sell products at discounted prices has helped attract customers who have been seeking both value and convenience amid the inflationary environment.

The abovementioned factors have been aiding this operator of membership warehouses in registering an impressive sales run. We estimate a 5.3% jump in net sales and a 7.8% rise in total membership fees for the quarter under discussion. No wonder, the company’s total paid members have been rising. Its growing customer base and high renewal rates have been fueling sales. We expect a 4.2% jump in comparable sales for the second quarter.

Despite these tailwinds, margins remain an area to watch. Any deleverage in the SG&A rate, higher labor and occupancy costs, and increased marketing and other store-related expenses might have weighed on margins.

What the Zacks Model Unveils

Our proven model predicts an earnings beat for Costco this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat, which is the case here. You can see the complete list of today’s Zacks #1 Rank stocks here.

Costco has a Zacks Rank #2 and an Earnings ESP of +0.12%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Other Stocks With the Favorable Combination

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

Ross Stores (ROST - Free Report) currently has an Earnings ESP of +3.16% and a Zacks Rank #2. The company is likely to register an increase in the bottom line when it reports fourth-quarter fiscal 2022 results. The Zacks Consensus Estimate for the quarterly earnings per share of $1.23 suggests an increase of 18.3% from the year-ago quarter.

Ross Stores’ top line is expected to rise year over year. The Zacks Consensus Estimate for quarterly revenues is pegged at $5.13 billion, which suggests a rise of 2.2% from the figure reported in the prior-year quarter. ROST delivered an earnings beat of 10.5%, on average, in the trailing four quarters.

Casey's General Stores (CASY - Free Report) currently has an Earnings ESP of +14.04% and a Zacks Rank #3. The company is likely to register a bottom-line decline when it reports third-quarter fiscal 2023 numbers. The Zacks Consensus Estimate for the quarterly earnings per share of $1.67 suggests a decline of 2.3% from the year-ago quarter.

Casey's top line is expected to increase year over year. The Zacks Consensus Estimate for quarterly revenues is pegged at $3.52 billion, which indicates an increase of 15.5% from the figure reported in the prior-year quarter. Casey's has a trailing four-quarter earnings surprise of 7.2%, on average.

Five Below (FIVE - Free Report) currently has an Earnings ESP of +0.30% and a Zacks Rank of 3. The company is likely to register an increase in the bottom line when it reports fourth-quarter fiscal 2022 results. The Zacks Consensus Estimate for the quarterly earnings per share of $3.06 suggests an increase of 22.9% from the year-ago quarter.

Five Below’s top line is expected to rise year over year. The Zacks Consensus Estimate for quarterly revenues is pegged at $1.11 billion, which suggests a rise of 10.9% from the figure reported in the prior-year quarter.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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