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Costco (COST) Dips More Than Broader Markets: What You Should Know

Zacks Equity Research
Qualcomm (QCOM) closed at $72.55 in the latest trading session, marking a -0.83% move from the prior day.

Costco (COST) closed the most recent trading day at $240.18, moving -1.66% from the previous trading session. This change lagged the S&P 500's 1.65% loss on the day. At the same time, the Dow lost 1.79%, and the tech-heavy Nasdaq lost 1.96%.

Heading into today, shares of the warehouse club operator had lost 0.93% over the past month, lagging the Retail-Wholesale sector's gain of 2.27% and the S&P 500's gain of 1.53% in that time.

COST will be looking to display strength as it nears its next earnings release, which is expected to be May 30, 2019. The company is expected to report EPS of $1.81, up 6.47% from the prior-year quarter. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $34.78 billion, up 7.47% from the year-ago period.

Looking at the full year, our Zacks Consensus Estimates suggest analysts are expecting earnings of $7.91 per share and revenue of $152.46 billion. These totals would mark changes of +15.81% and +7.69%, respectively, from last year.

It is also important to note the recent changes to analyst estimates for COST. These revisions typically reflect the latest short-term business trends, which can change frequently. With this in mind, we can consider positive estimate revisions a sign of optimism about the company's business outlook.

Based on our research, we believe these estimate revisions are directly related to near-team stock moves. Investors can capitalize on this by using the Zacks Rank. This model considers these estimate changes and provides a simple, actionable rating system.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. The Zacks Consensus EPS estimate has moved 0.02% lower within the past month. COST is currently a Zacks Rank #3 (Hold).

Looking at its valuation, COST is holding a Forward P/E ratio of 30.87. For comparison, its industry has an average Forward P/E of 20.77, which means COST is trading at a premium to the group.

Investors should also note that COST has a PEG ratio of 3.45 right now. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. Retail - Discount Stores stocks are, on average, holding a PEG ratio of 1.99 based on yesterday's closing prices.

The Retail - Discount Stores industry is part of the Retail-Wholesale sector. This industry currently has a Zacks Industry Rank of 57, which puts it in the top 23% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our individual industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

You can find more information on all of these metrics, and much more, on Zacks.com.


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