Shares in Costco Wholesale (COST) dropped in price today after a warning that early risers may have caused damage to its earnings.
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Executive Perks
Rupesh Parikh, analyst at Oppenheimer, said Costco’s fourth-quarter earnings may fall short of expectations due to costs related to early shopping hours for executive members.
The warehouse chain reinstated the perk for its executive members at the end of June. It meant that members could shop in its stores from 9 am to 10 am every day before others get in, except for Saturday, when the early access ends at 9:30 am.
Costco is scheduled to announce its results next Thursday. Oppenheimer is projecting fourth-quarter earnings of $5.70, up from its previous forecast of $5.40, but still below a Wall Street estimate of $5.81 that possibly does not reflect expenses tied to early shopping hours.
Costco has, however, a strong track record in beating earnings projections over the last few quarters – see below:
Share Strength
Costco’s shares have performed well in the year-to-date rising 4.4%, but falling 1.2% in the last three months. It has trailed rivals such as Walmart (WMT) which is up 16% this year.
Overall, though its value proposition has continued to resonate with consumers despite a cautious economic backdrop.
“Consistent with our playbook lately, for longer-term players, we would continue to take advantage of any dips,” Parikh said. “Near term, we see limited EPS upside potential, and Costco is up against very difficult comparisons in the non-foods category.”
Oppenheimer maintained its outperform rating and a price target of $1,130 on the stock.
“We continue to believe a premium valuation is warranted given its superior global unit growth prospects, leading competitive position, and track record of driving share gains,” Parikh said.
Is COST a Good Stock to Buy Now?
On TipRanks, COST has a Moderate Buy consensus based on 12 Buy and 9 Hold ratings. Its highest price target is $1,225. COST stock’s consensus price target is $1,087.47, implying a 14.18% upside.
