Wall Street’s keen eye will be fixed firmly on Costco’s (COST) stock as the food and general merchandise retailer gears up to unveil its fiscal fourth-quarter results on Thursday, September 26.
As earnings day looms, is it the opportune moment to dive into Costco’s shares and how does this bulk scale retailer measure up against industry rivals like Walmart (WMT) and Amazon (AMZN)? Let’s delve into the details.
Costco’s Q4 Expectations
Just like Walmart, Costco has made strides in bolstering its digital presence to keep pace with the e-commerce giant, Amazon. Last quarter saw Costco’s online sales surge by 21% year-over-year, with an anticipated 12% growth during Q4. Overall, Q4 sales for Costco are projected to rise by 1% to $79.75 billion.
On the earnings front, Q4 EPS is forecasted to climb by 4% to $5.05. Notably, Costco has outshone the Zacks EPS Consensus for the past six quarters, delivering an average earnings surprise of 2.32% across its last four quarterly reports.
Costco’s Growth Trajectory
Based on Zacks estimates, Costco’s total sales are on track to increase by 5% in fiscal 2024 and are predicted to notch up another 7% in FY25, reaching $273.26 billion. Annual earnings are currently slated to grow by 10% this year and are expected to see an additional 9% uptick in FY25, amounting to $17.65 per share.
Performance & Valuation Comparison
Costco’s shares have witnessed a remarkable +36% surge year-to-date, a step behind Walmart’s +53% but outstripping Amazon’s +27% and the benchmark S&P 500’s +20%. Impressively, over the past three years, COST has surged by nearly +100%, showcasing a significant outperformance compared to broader market indices, Amazon’s +14%, and even Walmart’s +70%.
However, at the current levels of slightly over $900, COST boasts a forward earnings multiple of 51.1X, eclipsing the benchmark’s 24.2X. Despite its position as a retail leader, Costco’s stock trades at a noticeable premium to both Walmart and Amazon, which sport forward earnings ratios of 33.1X and 40.8X, respectively.
Bottom Line
Following the robust year-to-date rally, Costco’s stock lands a Zacks Rank #3 (Hold). While the growth prospects for Costco remain compelling, there may be more attractive entry points considering the current valuation. Nevertheless, COST stands as a promising long-term investment prospect, especially if the company manages to meet or surpass its Q4 expectations.
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