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Is Costco's (COST) Stock a Buy as Earnings Approach
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Wall Street will watch Costco’s (COST - Free Report) stock closely this week with the food and general merchandise retailer set to report its fiscal fourth quarter results on Thursday, September 26.
Let’s see if it’s time to buy Costco’s stock as earnings approach and look at how the bulk scale retailer stacks up to some of its competitors such as Walmart (WMT - Free Report) and Amazon (AMZN - Free Report) .
Costco’s Q4 Expectations
Like Walmart, Costco has strived to expand its digital growth to compete against Amazon. Last quarter, Costco’s e-commerce sales rose 21% year over year with 12% growth expected during Q4. Overall, Costco’s Q4 sales are expected to be up 1% to $79.75 billion.
On the bottom line, Q4 EPS is expected to increase 4% to $5.05. Notably, Costco has surpassed the Zacks EPS Consensus for six consecutive quarters posting an average earnings surprise of 2.32% in its last four quarterly reports.
Image Source: Zacks Investment Research
Costco’s Growth Trajectory
Based on Zacks estimates, Costco’s total sales are now projected to be up 5% in fiscal 2024 and are forecasted to rise another 7% in FY25 to $273.26 billion. Annual earnings are currently slated to expand 10% this year and are projected to increase another 9% in FY25 to $17.65 per share.
Image Source: Zacks Investment Research
Performance & Valuation Comparison
Costco shares have soared +36% year to date which has trailed Walmart’s +53% but topped Amazon’s +27% and the benchmark S&P 500’s +20%. Even better, over the last three years, COST is up nearly +100% to impressively outperform the broader indexes, Amazon's +14%, and even Walmart’s +70%.
Image Source: Zacks Investment Research
However, at current levels of just over $900, COST is at a 51.1X forward earnings multiple compared to the benchmark’s 24.2X.
Despite being a retail leader, Costco’s stock also trades at a noticeable premium to Walmart and Amazon which trade at 33.1X and 40.8X forward earnings respectively.
Image Source: Zacks Investment Research
Bottom Line
After such a sharp YTD rally, Costco’s stock lands a Zacks Rank #3 (Hold). Although Costco’s expansion remains compelling, there could certainly be better buying opportunities given the company’s valuation. That said, COST should remain a viable long-term investment especially if Costco can reach or exceed its Q4 expectations.
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Is Costco's (COST) Stock a Buy as Earnings Approach
Wall Street will watch Costco’s (COST - Free Report) stock closely this week with the food and general merchandise retailer set to report its fiscal fourth quarter results on Thursday, September 26.
Let’s see if it’s time to buy Costco’s stock as earnings approach and look at how the bulk scale retailer stacks up to some of its competitors such as Walmart (WMT - Free Report) and Amazon (AMZN - Free Report) .
Costco’s Q4 Expectations
Like Walmart, Costco has strived to expand its digital growth to compete against Amazon. Last quarter, Costco’s e-commerce sales rose 21% year over year with 12% growth expected during Q4. Overall, Costco’s Q4 sales are expected to be up 1% to $79.75 billion.
On the bottom line, Q4 EPS is expected to increase 4% to $5.05. Notably, Costco has surpassed the Zacks EPS Consensus for six consecutive quarters posting an average earnings surprise of 2.32% in its last four quarterly reports.
Image Source: Zacks Investment Research
Costco’s Growth Trajectory
Based on Zacks estimates, Costco’s total sales are now projected to be up 5% in fiscal 2024 and are forecasted to rise another 7% in FY25 to $273.26 billion. Annual earnings are currently slated to expand 10% this year and are projected to increase another 9% in FY25 to $17.65 per share.
Image Source: Zacks Investment Research
Performance & Valuation Comparison
Costco shares have soared +36% year to date which has trailed Walmart’s +53% but topped Amazon’s +27% and the benchmark S&P 500’s +20%. Even better, over the last three years, COST is up nearly +100% to impressively outperform the broader indexes, Amazon's +14%, and even Walmart’s +70%.
Image Source: Zacks Investment Research
However, at current levels of just over $900, COST is at a 51.1X forward earnings multiple compared to the benchmark’s 24.2X.
Despite being a retail leader, Costco’s stock also trades at a noticeable premium to Walmart and Amazon which trade at 33.1X and 40.8X forward earnings respectively.
Image Source: Zacks Investment Research
Bottom Line
After such a sharp YTD rally, Costco’s stock lands a Zacks Rank #3 (Hold). Although Costco’s expansion remains compelling, there could certainly be better buying opportunities given the company’s valuation. That said, COST should remain a viable long-term investment especially if Costco can reach or exceed its Q4 expectations.