As Costco’s fiscal fourth quarter results loom, Wall Street is gearing up to scrutinize the performance of the company’s stock. The food and general merchandise giant is scheduled to unveil its earnings on Thursday, September 26.
Let’s delve into Costco’s stock potential as the earnings report draws near and evaluate how the bulk-scale retailer compares to its competitors like Walmart (WMT) and Amazon (AMZN).
Costco’s Q4 Earnings Outlook
Like Walmart, Costco has made significant efforts to expand its digital footprint in order to compete with Amazon. E-commerce sales for Costco saw a 21% surge in the previous quarter, with a further 12% growth anticipated for Q4. Overall, Costco’s Q4 sales are projected to rise by 1% to $79.75 billion.
On the earnings front, Q4 EPS is forecasted to increase by 4% to $5.05. Noteworthy is Costco’s track record of surpassing the Zacks EPS Consensus for six consecutive quarters, with an average earnings surprise of 2.32% in its last four quarterly reports.
Costco’s Growth Trajectory
According to Zacks estimates, Costco’s total sales are expected to mark a 5% increase in fiscal 2024, with a further 7% rise projected for FY25 to $273.26 billion. Annual earnings are set to grow by 10% this year and are estimated to see another 9% increase in FY25 to $17.65 per share.
Performance & Valuation Comparison
Costco shares have surged by +36% year to date, trailing Walmart’s +53% but outpacing Amazon’s +27% and the S&P 500’s +20%. Impressively, over the past three years, COST has soared by nearly +100%, showcasing superior performance compared to broader indexes, Amazon’s +14%, and even Walmart’s +70%.
However, at the current levels of just over $900, COST is trading at a forward earnings multiple of 51.1X, significantly higher than the benchmark’s 24.2X. Despite being a retail leader, Costco’s stock commands a premium compared to Walmart and Amazon, trading at 33.1X and 40.8X forward earnings, respectively.
Bottom Line
Following a robust year-to-date rally, Costco’s stock has been assigned a Zacks Rank #3 (Hold). While Costco’s growth prospects remain promising, potential investors should exercise caution due to the company’s current valuation. Nonetheless, COST could prove to be a sound long-term investment, particularly if it manages to meet or exceed its Q4 expectations.
7 Best Stocks for the Next 30 Days
Experts have identified 7 top stocks from the current list of 220 Zacks Rank #1 Strong Buys. These stocks are considered “Most Likely for Early Price Pops,” with the full list consistently outperforming the market with an average gain of +23.7% annually since 1988. It’s advisable to closely monitor these highlighted stocks for potential opportunities.