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Will Costco Earnings Beat Estimate?

Zacks Equity Research

Costco Wholesale Corporation (COST) is slated to report its third-quarter fiscal 2013 results before the market opens on May 30, 2013. In the last quarter, it posted a positive surprise of 4.8%. Let’s see how things are shaping up for this announcement.

Factors This Past Quarter

The better-than-expected results were buoyed by growth in the top line due to rise in membership fees and improved sales of discretionary items, as consumers seeking discounts started flocking to warehouse clubs. The company’s strategy to sell products at heavily discounted prices has helped it to remain on the growth trajectory amid beleaguered economic conditions as cash-strapped customers continue to reckon Costco as a viable option for low-cost necessities. Having continued to deliver consistent comparable-store sales growth, Costco is well positioned in the warehouse club industry.

Earnings Whispers?

Our proven model does not conclusively show that Costco is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank #1, #2 or #3 for this to happen. This is not the case here, as you will see below.

Zacks ESP: ESP for Costco is 0.00%. This is because the Most Accurate Estimate remains in line with the Zacks Consensus Estimate of $1.02.

Zacks Rank #3 (Hold): Costco’s Zacks Rank #3 (Hold) lowers the predictive power of ESP because the Zacks Rank #3 when combined with 0.00% ESP makes surprise prediction difficult. We caution against stocks with a Zacks Ranks #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks that Warrant a Look

Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat:

Pacific Sunwear of California Inc. (PSUN), Earnings ESP of +50.00% and a Zacks Rank #2 (Buy).

Lululemon Athletica Inc. (LULU), Earnings ESP of +3.33% and a Zacks Rank #2 (Buy).

Foot Locker, Inc. (FL), Earnings ESP of +1.14% and a Zacks Rank #2 (Buy).

Read the Full Research Report on COST

Read the Full Research Report on FL

Read the Full Research Report on LULU

Read the Full Research Report on PSUN

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