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Costco (COST) Outpaces Stock Market Gains: What You Should Know

Zacks Equity Research

Costco (COST) closed at $294.49 in the latest trading session, marking a +0.72% move from the prior day. This move outpaced the S&P 500's daily gain of 0.66%. Elsewhere, the Dow gained 1%, while the tech-heavy Nasdaq added 0.38%.

Heading into today, shares of the warehouse club operator had gained 4.61% over the past month, outpacing the Retail-Wholesale sector's loss of 4.56% and the S&P 500's loss of 5.01% in that time.

Investors will be hoping for strength from COST as it approaches its next earnings release, which is expected to be October 3, 2019. In that report, analysts expect COST to post earnings of $2.53 per share. This would mark year-over-year growth of 7.2%. Meanwhile, our latest consensus estimate is calling for revenue of $47.18 billion, up 6.24% from the prior-year quarter.

For the full year, our Zacks Consensus Estimates are projecting earnings of $8.04 per share and revenue of $152.45 billion, which would represent changes of +17.72% and +7.68%, respectively, from the prior year.

Any recent changes to analyst estimates for COST should also be noted by investors. 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.

Research indicates that these estimate revisions are directly correlated with near-term share price momentum. 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 0.04% higher within the past month. COST currently has a Zacks Rank of #3 (Hold).

In terms of valuation, COST is currently trading at a Forward P/E ratio of 36.36. This represents a premium compared to its industry's average Forward P/E of 20.94.

Meanwhile, COST's PEG ratio is currently 4.1. 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. COST's industry had an average PEG ratio of 1.95 as of yesterday's close.

The Retail - Discount Stores industry is part of the Retail-Wholesale sector. This group has a Zacks Industry Rank of 41, putting it in the top 17% 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.

To follow COST in the coming trading sessions, be sure to utilize Zacks.com.


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