We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Why Is Costco (COST) Down 5.7% Since the Last Earnings Report?
Read MoreHide Full Article
A month has gone by since the last earnings report for Costco Wholesale Corporation (COST - Free Report) . Shares have lost about 5.7% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Costco Earnings and Revenues Miss Estimates in Q2
Costco Wholesale Corporation delivered second straight quarter of negative earnings surprise as it reported second-quarter fiscal 2017. Total revenue also fell short of the Zacks Consensus Estimate for the ninth consecutive quarter. However, the company announced an increase in membership fee.
Costco posted quarterly earnings of $1.17 per share that missed the Zacks Consensus Estimate of $1.35 and declined 5.6% from the prior-year period. Total revenue, which includes net sales and membership fee, came in at $29,766 million lagging the Zacks Consensus Estimate of 29,988 million but increased 5.7% year over year.
Delving Deeper
Quarterly net sales were up 5.7% to $29,130 million, while membership fee increased 5.5% to $636 million. This Issaquah, WA based company announced that effective Jun 1, 2017, it will raise annual membership fees by $5 to $60 for the U.S. and Canada Goldstar (individual), Business, and Business add-on members (“Primary” Members). Annual fees for Executive Memberships in the U.S. and Canada will also jump to $120 from $110.
Total online sales jumped 12%, and increased 11% on a comp basis.
Costco’s comparable-store sales (comps) for the quarter improved 3%. The company witnessed comps growth of 3% and 8% across the U.S. and Canadian locations, respectively. However, comps at the Other International locations declined 2%.
Excluding the effect of gasoline prices and foreign exchange, the company witnessed comps growth of 3% during the quarter, with the U.S., Canada and Other International comps registering growth of 3%, 2% and 3%, respectively.
Comps for the four-week period ended Feb 26, 2017 increased 4%, following an increase of 7% in January, 3% in December, 1% in November, 2% in October and 1% in September.
Costco’s operating income in the quarter fell 1.4% year over year to $844 million, while operating margin (as a percentage of total revenue) contracted 20 basis points to 2.8%.
Store Update
Costco operates 728 warehouses, comprising 508 warehouses in the U.S. and Puerto Rico, 94 in Canada, 37 in Mexico, 28 in the UK, 25 in Japan, 13 in Korea, 13 in Taiwan, 8 in Australia, and 2 in Spain.
During the quarter under review, the company opened 4 new locations. In fiscal 2017, the company plans to open 29 net new locations – 14 in the U.S., 8 in Canada and one each in Japan, Korea, Taiwan, Mexico, and Australia as well as first opening in France and Iceland.
Financial Aspects
Costco ended the quarter with cash and cash equivalents of $4,744 million and long-term debt (including current portion) of $5,072 million. The company’s shareholders’ equity was $12,440 million, excluding non-controlling interests of $272 million. Management incurred capital expenditures of approximately $515 million during the quarter. The company anticipates capital expenditures in the range of $2.7–$2.8 billion for fiscal 2017. During the quarter, the company repurchased 411,000 shares for a total of $66 million.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend for fresh estimates. There have been eleven revisions lower for the current quarter.
At this time, Costco's stock has an average Growth Score of 'C', while its Momentum is lagging a lot with 'F'. However, the stock was allocated a grade of 'C' on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'D'. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is suitable for value and growth investors.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Why Is Costco (COST) Down 5.7% Since the Last Earnings Report?
A month has gone by since the last earnings report for Costco Wholesale Corporation (COST - Free Report) . Shares have lost about 5.7% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Costco Earnings and Revenues Miss Estimates in Q2
Costco Wholesale Corporation delivered second straight quarter of negative earnings surprise as it reported second-quarter fiscal 2017. Total revenue also fell short of the Zacks Consensus Estimate for the ninth consecutive quarter. However, the company announced an increase in membership fee.
Costco posted quarterly earnings of $1.17 per share that missed the Zacks Consensus Estimate of $1.35 and declined 5.6% from the prior-year period. Total revenue, which includes net sales and membership fee, came in at $29,766 million lagging the Zacks Consensus Estimate of 29,988 million but increased 5.7% year over year.
Delving Deeper
Quarterly net sales were up 5.7% to $29,130 million, while membership fee increased 5.5% to $636 million. This Issaquah, WA based company announced that effective Jun 1, 2017, it will raise annual membership fees by $5 to $60 for the U.S. and Canada Goldstar (individual), Business, and Business add-on members (“Primary” Members). Annual fees for Executive Memberships in the U.S. and Canada will also jump to $120 from $110.
Total online sales jumped 12%, and increased 11% on a comp basis.
Costco’s comparable-store sales (comps) for the quarter improved 3%. The company witnessed comps growth of 3% and 8% across the U.S. and Canadian locations, respectively. However, comps at the Other International locations declined 2%.
Excluding the effect of gasoline prices and foreign exchange, the company witnessed comps growth of 3% during the quarter, with the U.S., Canada and Other International comps registering growth of 3%, 2% and 3%, respectively.
Comps for the four-week period ended Feb 26, 2017 increased 4%, following an increase of 7% in January, 3% in December, 1% in November, 2% in October and 1% in September.
Costco’s operating income in the quarter fell 1.4% year over year to $844 million, while operating margin (as a percentage of total revenue) contracted 20 basis points to 2.8%.
Store Update
Costco operates 728 warehouses, comprising 508 warehouses in the U.S. and Puerto Rico, 94 in Canada, 37 in Mexico, 28 in the UK, 25 in Japan, 13 in Korea, 13 in Taiwan, 8 in Australia, and 2 in Spain.
During the quarter under review, the company opened 4 new locations. In fiscal 2017, the company plans to open 29 net new locations – 14 in the U.S., 8 in Canada and one each in Japan, Korea, Taiwan, Mexico, and Australia as well as first opening in France and Iceland.
Financial Aspects
Costco ended the quarter with cash and cash equivalents of $4,744 million and long-term debt (including current portion) of $5,072 million. The company’s shareholders’ equity was $12,440 million, excluding non-controlling interests of $272 million. Management incurred capital expenditures of approximately $515 million during the quarter. The company anticipates capital expenditures in the range of $2.7–$2.8 billion for fiscal 2017. During the quarter, the company repurchased 411,000 shares for a total of $66 million.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend for fresh estimates. There have been eleven revisions lower for the current quarter.
Costco Wholesale Corporation Price and Consensus
Costco Wholesale Corporation Price and Consensus | Costco Wholesale Corporation Quote
VGM Scores
At this time, Costco's stock has an average Growth Score of 'C', while its Momentum is lagging a lot with 'F'. However, the stock was allocated a grade of 'C' on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'D'. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is suitable for value and growth investors.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.