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Costco (COST) Q4 Earnings: Solid Comps Run a Key Factor

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Costco Wholesale Corporation (COST - Free Report) is slated to report fourth-quarter fiscal 2018 results on Oct 4. In the last reported quarter, the company outperformed the Zacks Consensus Estimate by 1.2%. 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.

Investors are keeping their fingers crossed and hoping for a positive earnings surprise from Costco in the quarter to be reported. The Zacks Consensus Estimate for the quarter under review is $2.34, reflecting a year-over-year increase of roughly 12.5%. We observe that the Zacks Consensus Estimate has increased by 3 cents in the past 30 days.

Factors Playing Key Roles

We believe that the company’s growth strategies, sturdy comparable-store sales (comps) performance, strong membership trends and higher penetration of Citi Visa co-brand card program are the pillars that reinforce its position. While major chains are grappling with sluggish store and mall traffic as consumers switch to online shopping, the company seems somewhat resilient to the challenging retail backdrop.

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. The company remains committed toward opening new clubs in domestic and international markets.

The company with its August sales results on Sep 6 had informed that net sales for the fourth quarter of fiscal 2018 grew 5% to $43.4 billion. Comps improved 9.5% during the quarter under review, representing an increase of 10.8%, 5.7% and 6.7% at the United States, Canada and Other International locations, respectively. This followed an overall comps growth of 10.2% in the preceding quarter.

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. 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 26.2% in the quarter under review.

Costco continued with positive comps performance driven by improved store traffic and average transaction size. Further, improving labor market, rising disposable income and elevated consumer sentiment are working in tandem for the company.

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 shows that Costco is likely to beat estimates this quarter. This is because 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 an Earnings ESP of +0.26% and a Zacks Rank #3. This makes us reasonably confident that the bottom line is likely to outperform estimates.

Other Stocks With Favorable Combination

Here are some 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:

Signet Jewelers Limited (SIG - Free Report) has an Earnings ESP of +8.57% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Walgreens Boots Alliance, Inc. (WBA - Free Report) has an Earnings ESP of +1.02% and a Zacks Rank #2.

Dillard's, Inc. (DDS - Free Report) has an Earnings ESP of +2.75% and a Zacks Rank #3.

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