Costco Earnings Preview: EPS and Revenue Growth Expected
By Nelson Hem | March 12, 2013 7:06 AM EST
Costco Wholesale (NASDAQ: COST [FREE Stock Trend Analysis]), which saw strong same-store sales in February where other big retailers did not, is scheduled to report its second-quarter fiscal 2013 results Tuesday, March 12, before the markets open.
Investors will be looking to see how the company has held up, with consumers facing higher gas prices, tax refunds delays and the end of the payroll-tax holiday. Note that Costco's fiscal second quarter included the bulk of the holiday shopping season.
Analysts on average predict that Costco will report that its revenue rose more than nine percent year-over-year to $25.13 billion. And quarterly earnings of $1.06 per share are also expected. That compares to a profit of $0.90 per share in the same period of last year.
Note that the analysts' consensus EPS estimate has not changed in the past 60 days. And Costco's per-share earnings have not fallen short of the consensus estimate in the past five quarters. The earnings beat in the first quarter was by just two cents per share, though.
The company attributed better-than-expected first-quarter results to stronger sales and increased revenue from membership fees. And it reported that same-store revenue rose seven percent in the U.S. and nine percent overseas. Costco had previously announced a special dividend ahead of the potential fiscal cliff at the beginning of the year. The share price slipped less than two percent in the days following that earnings report.
Looking ahead, analysts so far are expecting similar growth of both earnings and revenue in the current quarter. In addition, the full-year forecast currently calls for per-share earnings to be more than 11 percent higher year-over-year, while revenue is up more than seven percent.
Costco Wholesale operates more than 610 membership warehouse stores in North America, the United Kingdom, Japan, Taiwan, South Korea and Australia. This S&P 500 component has a market capitalization near $44.9 billion, and it was founded in 1976 and is based in Issaquah, Washington. W. Craig Jelinek has been the president and chief executive since January 1, 2012.
Competitors include big-box retailers Target (NYSE: TGT) and Walmart (NYSE: WMT). Target just missed EPS estimates for its most recent quarter, while Walmart solidly beat expectations. But Walmart also offered soft guidance. And both retailers saw soft same-store sales in February.
During the three months that ended in February, Costco maintained its dividend -- currently a yield near 1.1 percent -- it saw solid same-store sales growth in both December and January, and it was accused by Tiffany (NYSE: TIF) of selling counterfeit merchandise.
The long-term EPS growth forecast is more than 13 percent, but the price-to-earnings (P/E) ratio is a little more than the industry average. The company's return on equity is more than 14 percent.
The number of shares sold short represents less than two percent of the float. That is the lowest short interest since November.
Of the 23 analysts surveyed by Thomson/First Call who follow the stock, 14 recommend buying shares -- eight of them rating the stock at Strong Buy. But their mean price target, or where they expect the stock to go, represents less than three percent potential upside. That target is less than the 52-week high reached in early December.
Shares have traded mostly between $100 and $103 since the beginning of the year, but the share price is more than 15 percent higher than a year ago. Shares are still trading above the 50-day and 200-day moving averages. Over the past six months, the stock has outperformed Walmart but it has underperformed the broader markets.
Investors interested in exchange traded funds invested in Costco might want to consider the following trades:
Market Vectors Retail ETF (NYSE: RTH) is about eight percent higher year to date.
Vanguard Consumer Staples ETF (NYSE: VDC) is about eight percent higher year to date.
Consumer Staples Select Sector SPDR (NYSE: XLP) is more than seven percent higher year to date.
PowerShares Dynamic Retail (NYSE: PMR) is more than five percent higher year to date.
Traders may prefer to consider the following alternative positions in the same industry.
Big Lots (NYSE: BIG) is up more than 26 percent year to date.
Dollar General (NYSE: DG) is up more than 11 percent year to date.
Dollar Tree (NASDAQ: DLTR) is up almost 13 percent year to date.
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