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

Zacks Equity Research

Costco (COST) closed the most recent trading day at $297.24, moving -0.73% from the previous trading session. This move lagged the S&P 500's daily loss of 0.29%. At the same time, the Dow lost 0.46%, and the tech-heavy Nasdaq lost 0.27%.

Heading into today, shares of the warehouse club operator had gained 0.7% over the past month, lagging the Retail-Wholesale sector's gain of 5.03% and the S&P 500's gain of 4.56% in that time.

Wall Street will be looking for positivity from COST as it approaches its next earnings report date. This is expected to be March 5, 2020. In that report, analysts expect COST to post earnings of $2.05 per share. This would mark year-over-year growth of 1.99%. Our most recent consensus estimate is calling for quarterly revenue of $38.19 billion, up 7.9% from the year-ago period.

Looking at the full year, our Zacks Consensus Estimates suggest analysts are expecting earnings of $8.59 per share and revenue of $162.79 billion. These totals would mark changes of +4.88% and +6.61%, respectively, from last year.

Investors should also note any recent changes to analyst estimates for COST. These recent revisions tend to reflect the evolving nature of short-term business trends. As a result, we can interpret positive estimate revisions as a good sign for the company's business outlook.

Based on our research, we believe these estimate revisions are directly related to near-team stock moves. To benefit from this, we have developed the Zacks Rank, a proprietary model which takes these estimate changes into account and provides an actionable rating system.

The Zacks Rank system ranges from #1 (Strong Buy) to #5 (Strong Sell). It has a remarkable, outside-audited track record of success, with #1 stocks delivering an average annual return of +25% since 1988. The Zacks Consensus EPS estimate has moved 0.37% higher within the past month. COST is currently sporting a Zacks Rank of #3 (Hold).

In terms of valuation, COST is currently trading at a Forward P/E ratio of 34.87. This represents a premium compared to its industry's average Forward P/E of 23.37.

Also, we should mention that COST has a PEG ratio of 4.3. 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 2.14 based on yesterday's closing prices.

The Retail - Discount Stores industry is part of the Retail-Wholesale sector. This group has a Zacks Industry Rank of 35, putting it in the top 14% of all 250+ industries.

The Zacks Industry Rank includes is listed in order from best to worst in terms of the average Zacks Rank of the individual companies within each of these sectors. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

Be sure to follow all of these stock-moving metrics, and many more, on Zacks.com.


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