Costco Wholesale Corp. (COST) is scheduled to post its third quarter 2010 results before the opening bell on Thursday.
Costco is one of the largest retailers in the warehouse club market and is well-positioned to weather the sluggish economic environment given its focus on low prices. Rising gasoline prices coupled with improved consumer spending helped comparable-store sales growth.
Costco, despite stiff competition from BJ’s Wholesale Club Inc. (BJ) and Sam’s Club, a division of Wal-Mart Stores Inc. (WMT) and the recession, indicated that consumers flocked to its stores for food and other necessities. However, they are still shying away from purchasing big-ticket items.
Costco’s comparable-store sales for April rose 11%, reflecting a comparable sales growth of 6% at its U.S. locations and 29% at its international divisions.
Costco also remains committed to offering incremental returns to its shareholders. Moreover, currency tailwinds coupled with the expansion into new markets will continue to boost top-line. However, aggressive pricing in response to stiff competition, to gain market share and drive traffic, may depress sales and margins.
The current Zacks Consensus Estimate for the third quarter is 66 cents, which has remained stagnant in the last 30 days with 2 out of 25 analysts raising their estimates and 3 revising downward. The current Zacks Consensus Estimate represents a year-over-year growth of 26.4%.
For fiscal 2010, the current Zacks Consensus Estimate is $2.90 per share, which represents a 14.2% increase over fiscal 2009 earnings. The Zacks Consensus Estimate has not shown any changes in the last 30 days – only one analyst raised estimates while 3 pulled back on expectations.
With respect to earnings surprises, Costco has performed across a wide range of earnings expectations over the last four quarters from a negative 3.7% to a positive 7.8%. The average remained positive at 1.1%. This suggests that Costco has beaten the Zacks Consensus Estimate by an average of 1.1% in the last four quarters.
Costco’s shares are maintaining a Zacks #3 Rank, which translates into a short-term ‘Hold’ recommendation. Our long-term recommendation for the stock also remains “Neutral”.
Read the full analyst report on “COST”
Read the full analyst report on “BJ”
Read the full analyst report on “WMT”
Zacks Investment Research
