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Costco stock dips despite fourth-quarter earnings beat

Markets reporter Ines Ferre joins Yahoo Finance Live to highlight the circumstances surrounding Costco's latest earnings report and the impact of increasing membership fees.

Video Transcript

RACHELLE AKUFFO: All right, in our earnings alert, we have Costco reporting Q4 earnings. Yahoo Finance's Ines Ferre joins us to break down those numbers, Ines.

INES FERRE: Yeah, Rachelle, and it's a beat on the top and the bottom line. Let's start with total revenue. That came in at $72.09 billion. The Street was expecting $71.89 billion. Also, taking a look at adjusted earnings per share, those came in at $4.20, quite a beat because the Street was expecting $4.14.

Now, as far as shares right now, they are slightly lower in after hours. But look, what the Street was also wanting to know was about a fee hike. Will Costco be increasing its membership fee? And Costco has gone out of its way to imply that they will be waiting to increase that fee, that this is not the right time to be increasing the membership fee. So we will see if in the earnings call, there's any guidance regarding that. Shares are down year to date about 14%, but still outperforming the broader market. You've got 27 buy ratings on this stock, 10 hold, and 0 sell. Guys.

RACHELLE AKUFFO: All right, thanks, Ines. As we can see, this, though, moving to the downside in extended hours. Now, this is an interesting one. We were keeping an eye on Costco to see if they were going to raise those membership fees. They obviously took on a lot of new members as gas prices were going up. But as you can see there, a beat on the top and bottom line there, Seana.

SEANA SMITH: Yeah, Rachelle, it is interesting here, just looking at the strong numbers here from Costco. I don't think it's a huge surprise out there on any-- to anyone on the Street that's been closely watching this company. We know a lot of people have been choosing to shop at Costco, especially in this high inflationary environment. So they are a company that does stand to typically benefit in this current economic environment that we are in.

But when you take a look at the stock, it's still off about 13%, Dave, over the past six months. Year to date, off just about 15%. So when you compare that to the broader market downturn, yes, Costco is doing well. But the company still does have some troubles here, as you look out to the fourth quarter and then, of course, into 2023. The membership fees, though, that was interesting that they didn't raise it when some of their competitors have.

DAVE BRIGGS: Yeah, that seems like the pressure from investors were hoping and urging them that this was not a good time to raise fees, despite the fact that, to your point, Sam's Club did, in fact, raise theirs. But what do you make of the fact that shares are down 2% on another beat? And looking forward, it looks like Costco fits this environment, as people begin to trade back, as people begin to cut back and find those savings, due to the increased cost. 13% higher for groceries than a year ago, 19, what, late '70s. We haven't seen anything like that since late '70s. What do you make of the stock reaction?

SEANA SMITH: Yeah, you know, it's interesting. I think we have seen this type of reaction even when companies have beat. Sometimes that beat has already been baked in to the current price. So they beat not by a wide margin, though, if you do take a look at these numbers, EPS of 420. The estimate was for for 414. Revenue, 72.1 billion. The estimate out there was for 71.9 billion. So, yes, they beat, but not by a wide margin here. And maybe that's the reason why we're not seeing a little bit more excitement. now from the Street after hours.