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

Zacks Equity Research

Costco (COST) closed at $304.54 in the latest trading session, marking a +0.29% move from the prior day. This change outpaced the S&P 500's 0.05% gain on the day. At the same time, the Dow added 0.11%, and the tech-heavy Nasdaq gained 0.11%.

Heading into today, shares of the warehouse club operator had gained 0.42% over the past month, lagging the Retail-Wholesale sector's gain of 1.18% and the S&P 500's gain of 4.32% in that time.

Investors will be hoping for strength from COST as it approaches its next earnings release, which is expected to be December 12, 2019. On that day, COST is projected to report earnings of $1.71 per share, which would represent year-over-year growth of 6.21%. Our most recent consensus estimate is calling for quarterly revenue of $37.43 billion, up 6.72% from the year-ago period.

For the full year, our Zacks Consensus Estimates are projecting earnings of $8.56 per share and revenue of $162.93 billion, which would represent changes of +4.52% and +6.7%, respectively, from the prior year.

Any recent changes to analyst estimates for COST should also be noted by investors. These revisions help to show the ever-changing nature of near-term business trends. With this in mind, we can consider positive estimate revisions a sign of optimism about the company's business outlook.

Research indicates that these estimate revisions are directly correlated with near-term share price momentum. We developed the Zacks Rank to capitalize on this phenomenon. Our system takes these estimate changes into account and delivers a clear, actionable rating model.

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. Over the past month, the Zacks Consensus EPS estimate has moved 0.26% higher. COST is currently a Zacks Rank #2 (Buy).

Digging into valuation, COST currently has a Forward P/E ratio of 35.47. This represents a premium compared to its industry's average Forward P/E of 23.58.

Investors should also note that COST has a PEG ratio of 4.18 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. COST's industry had an average PEG ratio of 2.39 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 34, putting it in the top 14% 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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