Wall Street will keep a vigilant eye on Costco’s (COST) stock in the coming days as the renowned food and general merchandise retailer gears up to unveil its fiscal fourth quarter results on Thursday, September 26.
Let’s assess the potential of investing in Costco’s stock as earnings draw near and delve into how this bulk-scale retailer compares to its counterparts like Walmart (WMT) and Amazon (AMZN).
Costco’s Q4 Expectations
Similar to Walmart, Costco has made significant efforts to boost its digital presence to compete with Amazon. The preceding quarter witnessed a 21% increase in Costco’s e-commerce sales year over year, with a projected 12% growth anticipated for Q4. Overall, Costco’s Q4 sales are forecasted to mark a 1% rise to $79.75 billion.
On the earnings front, Q4 EPS is estimated to elevate by 4% to $5.05. Noteworthy is that Costco has consistently outperformed the Zacks EPS Consensus for six consecutive quarters, reflecting an average earnings surprise of 2.32% in its last four quarterly releases.
Costco’s Growth Trajectory
According to Zacks estimates, Costco’s total sales are on track to increase by 5% in fiscal 2024, with a further projected 7% surge in FY25 to reach $273.26 billion. Annual earnings are currently poised to escalate by 10% this year and are expected to witness another 9% upsurge in FY25, reaching $17.65 per share.
Performance & Valuation Comparison
Costco shares have witnessed an impressive 36% surge year to date, although lagging behind Walmart’s 53% surge, they have outpaced Amazon’s 27% increase as well as the benchmark S&P 500’s 20% growth. Over the past three years, COST has soared nearly 100%, markedly outperforming the broader indexes, Amazon’s 14% rise, and even Walmart’s 70% increase.
Despite its recent performance, COST currently stands at a 51.1X forward earnings multiple, compared to the benchmark’s 24.2X. Notably, 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 substantial year-to-date rally, Costco’s stock holds a Zacks Rank #3 (Hold). While Costco’s growth story remains compelling, there might be more attractive buying opportunities considering the company’s valuation. However, COST continues to present itself as a viable long-term investment, particularly if it manages to meet or exceed its Q4 expectations.
7 Best Stocks for the Next 30 Days
Just released: Experts have curated 7 top stocks from the list of 220 Zacks Rank #1 Strong Buys, predicting these tickers as “Most Likely for Early Price Pops.”
Since 1988, this selection has consistently outperformed the market, surpassing it by more than 2 times each year with an average annual gain of 23.7%. Keep a close eye on these selected 7 stocks for potential opportunities.