Wall Street will keep a keen eye on Costco’s COST shares this week as the popular food and general merchandise retailer gears up to disclose its fiscal fourth-quarter results come Thursday, September 26.
Costco’s Q4 Expectations
Costco, like Walmart, has been strategically enhancing its digital footprint to keep up with the competition posed by Amazon. Last quarter, Costco witnessed a 21% year-over-year surge in e-commerce sales, with a further 12% growth anticipated for Q4. Overall, Q4 sales for Costco are expected to increase by 1% to reach $79.75 billion.
On the earnings front, Q4 EPS is predicted to rise by 4% to $5.05. Impressively, Costco has continually surpassed the Zacks EPS Consensus over the last six quarters, with an average earnings surprise of 2.32% in its previous four quarterly reports.
Costco’s Growth Trajectory
Based on Zacks estimates, Costco’s overall sales are forecasted to escalate by 5% in fiscal 2024, followed by an additional 7% increase in FY25, reaching $273.26 billion. The annual earnings trajectory projects a 10% expansion this year, with another estimated 9% increase in FY25 to reach $17.65 per share.
Performance & Valuation Comparison
Costco shares have surged by an impressive 36% year to date, though this trails behind Walmart’s 53% increase. Nonetheless, Costco has outperformed Amazon’s 27% rise and the benchmark S&P 500’s 20% growth. Over the past three years, COST has shown a remarkable 100% increase, surpassing broader indexes, Amazon’s 14% rise, and even edging out Walmart’s 70% growth.
Despite these gains, at the current price of just over $900, COST is trading at a 51.1X forward earnings multiple, notably higher than the benchmark’s 24.2X. Additionally, Costco’s stock carries a premium valuation compared to Walmart and Amazon, which are at 33.1X and 40.8X forward earnings, respectively.
Bottom Line
Following a significant year-to-date rally, Costco’s stock holds a Zacks Rank of #3 (Hold). While Costco’s growth prospects are promising, investors may find better entry points considering the company’s valuation. Nonetheless, COST remains a strong long-term investment candidate, especially if the company achieves or surpasses its Q4 expectations.