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Will Costco (COST) Beat Earnings?

Zacks Equity Research

Costco Wholesale Corporation (COST) is slated to report its first-quarter fiscal 2014 results on Dec 11, 2013. In the last quarter, it posted a negative surprise of 4.1%. Let’s see how things are shaping up for this announcement.

Factors this Past Quarter

Costco posted lower-than-expected fourth-quarter fiscal 2013 results, as the rate of increase in sales decelerated. The warehouse retailer’s total revenue climbed 0.8% to $32,487 million from the prior-year quarter, but fell short of the Zacks Consensus Estimate of $32,702 million. Moreover, the top-line growth rate narrowed to 0.8% in the reported quarter from 7.9% in the third quarter of fiscal 2013.

Earnings Whispers?

Our proven model does not conclusively show that Costco is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, #2 or #3 for this to happen. This is not the case here, as you will see below.

Negative Zacks ESP: ESP for Costco is -0.98%. This is because the Most Accurate estimate stands at $1.01, while the Zacks Consensus Estimate is pegged at $1.02.

Zacks Rank #3 (Hold): Costco’s Zacks Rank #3 (Hold) lowers the predictive power of ESP. The Zacks Rank #3 when combined with a negative ESP makes surprise prediction difficult. We caution against stocks with a Zacks Ranks #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks that Warrant a Look

Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat:

Barnes & Noble, Inc. (BKS), Earnings ESP of +27.12% and a Zacks Rank #2 (Buy).

Marinemax Inc. (HZO), Earnings ESP of +7.14% and a Zacks Rank #2 (Buy).

Five Below, Inc. (FIVE) has an Earnings ESP of +1.82% and a Zacks Rank #3 (Hold).

Read the Full Research Report on COST
Read the Full Research Report on BKS
Read the Full Research Report on HZO
Read the Full Research Report on FIVE

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