Costco Wholesale Corporation (COST - Free Report) is slated to report second-quarter fiscal 2019 results on Mar 7. In the last reported quarter, this Issaquah, WA-based company’s bottom line underperformed the Zacks Consensus Estimate by a penny. Let’s see how things are shaping up prior to this announcement.
The Zacks Consensus Estimate for the quarter under review is $1.67, reflecting year-over-year increase of roughly 17.6%. We observe that the Zacks Consensus Estimate has advanced three cents in the past 30 days. The Zacks Consensus Estimate for revenues currently stands at $35,651 million, exhibiting year-over-year jump of roughly 8%. In the last reported quarter, the company’s net sales grew 10.2%.
Factors Influencing Costco’s Performance
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 sales (comps) performance and strong membership trends bode well for the stock.
Additionally, a differentiated product range enables the company to provide an upscale shopping experience for its members, consequently resulting in market share gains and higher sales per square foot.
This operator of membership warehouses reported comps for the month of January 2019. The metric increased 5.2% for the four-week ended Feb 3, 2019. This follows an increase of 6.1% in December and 9.2% in November. January comps reflect an increase of 6.6% and 6.5% in the United States and Other International locations, respectively, but a decline of 2.9% in Canada.
Management highlighted that with Lunar New Year commencing 11 days earlier this year compared with last year positively impacted total sales and Other International sales by approximately 0.5% and 4.5%, respectively. As a result, sales for February are likely to be negatively impacted on account of this.
Moving on, Costco is also steadily expanding e-commerce capabilities in the United States, Canada, the U.K., Mexico, Korea and Taiwan. E-commerce comparable sales rose 22.1% in the month of January 2019, following an increase of 13.6% and 46.1% in the months of December and November, respectively.
Certainly, the decent 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.
Model Predicts Higher Probability of Earnings Beat
Our proven model shows 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 and an Earnings ESP of +0.62%. This makes us reasonably confident of an earnings beat.
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:
Zumiez (ZUMZ - Free Report) has an Earnings ESP of +0.45% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Abercrombie & Fitch (ANF - Free Report) has an Earnings ESP of +2.28% and a Zacks Rank #2.
Ollie's Bargain Outlet (OLLI - Free Report) has an Earnings ESP of +1.43% and a Zacks Rank #2.
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