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

Zacks Equity Research

Costco (COST) closed the most recent trading day at $305.69, moving +0.27% from the previous trading session. This change outpaced the S&P 500's 0.38% loss on the day. Elsewhere, the Dow lost 0.46%, while the tech-heavy Nasdaq added 0.17%.

Prior to today's trading, shares of the warehouse club operator had lost 1.92% over the past month. This has lagged the Retail-Wholesale sector's loss of 0.88% and was narrower than the S&P 500's loss of 4.88% in that time.

Investors will be hoping for strength from COST as it approaches its next earnings release, which is expected to be March 5, 2020. The company is expected to report EPS of $2.06, up 2.49% from the prior-year quarter. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $38.34 billion, up 8.31% from the year-ago period.

COST's full-year Zacks Consensus Estimates are calling for earnings of $8.65 per share and revenue of $162.96 billion. These results would represent year-over-year changes of +5.62% and +6.72%, respectively.

Investors might also notice recent changes to analyst estimates for COST. These recent revisions tend to reflect the evolving nature of short-term business trends. As such, positive estimate revisions reflect analyst optimism about the company's business and profitability.

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 0.55% higher. COST is holding a Zacks Rank of #2 (Buy) right now.

In terms of valuation, COST is currently trading at a Forward P/E ratio of 35.23. For comparison, its industry has an average Forward P/E of 21.34, which means COST is trading at a premium to the group.

We can also see that COST currently has a PEG ratio of 4.34. 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 1.94 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 60, putting it in the top 24% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our 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.

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


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