Last week saw the newest quarterly earnings release from Costco Wholesale Corporation (NASDAQ:COST), an important milestone in the company's journey to build a stronger business. Revenues were US$37b, approximately in line with expectations, although earnings per share (EPS) performed substantially better. EPS of US$1.90 were also better than expected, beating analyst predictions by 11%. Earnings are an important time for investors, as they can track a company's performance, look at what top analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We've gathered the most recent forecasts to see whether analysts have changed their earnings models, following these results.
After the latest results, the 23 analysts covering Costco Wholesale are now predicting revenues of US$163.0b in 2020. If met, this would reflect a satisfactory 5.4% improvement in sales compared to the last 12 months. Earnings per share are expected to accumulate 2.8% to US$8.72. Yet prior to the latest earnings, analysts had been forecasting revenues of US$163.8b and earnings per share (EPS) of US$8.62 in 2020. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.
There were no changes to revenue or earnings estimates or the price target of US$305, suggesting that the company has met expectations in its recent result. The consensus price target just an average of individual analyst targets, so - considering that the price target changed, it would be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Costco Wholesale, with the most bullish analyst valuing it at US$335 and the most bearish at US$232 per share. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
Another way to assess these estimates is by comparing them to past performance, and seeing whether analysts are more or less bullish relative to other companies in the market. We would highlight that Costco Wholesale's revenue growth is expected to slow, with forecast 5.4% increase next year well below the historical 6.7%p.a. growth over the last five years. Juxtapose this against the other companies in the market with analyst coverage, which are forecast to grow their revenues (in aggregate) 4.0% next year. Even after the forecast slowdown in growth, it seems obvious that analysts still thinkCostco Wholesale will grow faster than the wider market.
The Bottom Line
The most obvious conclusion from these results is that there's been no major change in the business' prospects in recent times, with analysts holding earnings per share steady, in line with previous estimates. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - and our data does suggest that Costco Wholesale's revenues are expected to grow faster than the wider market. The consensus price target held steady at US$305, with the latest estimates not enough to have an impact on analysts' estimated valuations.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Costco Wholesale analysts - going out to 2024, and you can see them free on our platform here.
We also provide an overview of the Costco Wholesale Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.
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