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Costco (COST) Gains As Market Dips: What You Should Know

Zacks Equity Research
FedEx (FDX) delivered earnings and revenue surprises of 4.16% and -0.03%, respectively, for the quarter ended May 2019. Do the numbers hold clues to what lies ahead for the stock?

Costco (COST) closed the most recent trading day at $248.90, moving +0.22% from the previous trading session. This move outpaced the S&P 500's daily loss of 0.68%. Elsewhere, the Dow lost 0.33%, while the tech-heavy Nasdaq lost 1.46%.

Coming into today, shares of the warehouse club operator had gained 1.03% in the past month. In that same time, the Retail-Wholesale sector lost 3.06%, while the S&P 500 lost 1.19%.

Investors will be hoping for strength from COST as it approaches its next earnings release, which is expected to be May 30, 2019. On that day, COST is projected to report earnings of $1.83 per share, which would represent year-over-year growth of 7.65%. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $34.88 billion, up 7.78% from the year-ago period.

COST's full-year Zacks Consensus Estimates are calling for earnings of $7.94 per share and revenue of $152.48 billion. These results would represent year-over-year changes of +16.25% and +7.71%, respectively.

It is also important to note the 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, 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. Within the past 30 days, our consensus EPS projection has moved 0.21% higher. 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 31.28. This represents a premium compared to its industry's average Forward P/E of 20.31.

Also, we should mention that COST has a PEG ratio of 3.49. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. COST's industry had an average PEG ratio of 1.9 as of yesterday's close.

The Retail - Discount Stores industry is part of the Retail-Wholesale sector. This industry currently has a Zacks Industry Rank of 163, which puts it in the bottom 37% 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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