May 25, 2022

StrategisChhr

Skillful Business Crafters

Costco Stock Up After Hours After Earnings, Same-Store Sales Beat

Costco stock nudged higher in extended trade after the membership warehouse retailer late Thursday reported fiscal first-quarter results that beat expectations.




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The move higher after hours reversed a broader trend of post-earnings declines for the stock. But some analysts have also raised questions over how much juice the stock has left after running more than 48% higher for the year through late November.

The retailer reported after a rise in gasoline and grocery prices, as supply chains remain bottlenecked or depleted.

Costco Earnings

Costco earned $2.98 per share, well above FactSet estimates for $2.67 per share. Total revenue of $50.4 billion cleared estimates for $50.2 billion.

The company’s same-store sales rose 15%. That topped the Consensus Metrix forecast for a 13% gain.

Costco Stock

Costco stock rose 1.4% to 531.49 after hours in the stock market today. Shares finished the regular session down 1%.

The stock reached a high of 560.78 late last month. It has eased from those levels, but is so far finding firm support at its 21-day exponential moving average.

Oppenheimer analysts, in a research note this week, said that “as we look at COST’s prospects over the next 12-18 months, we believe the relative valuation could be stretched on a shorter-term basis due in part to a meaningful investor rotation into higher quality names lately.”

Still, those analysts remain upbeat on Costco stock. But they noted that earnings, at least over recent quarters, haven’t been enough to push shares higher. The firm pointed out that Costco has fallen after six out of the past eight quarterly earnings reports.

The company has a 90 Composite Rating. Its EPS Rating is 84.

Stocks in IBD’s Major Discount Chains industry group have collectively gained 23.4% so far this year. Costco has been the group’s fastest climber, followed by Target (TGT), with a gain of 34.7% through Thursday.

Membership Fee Hike Coming?

Oppenheimer analysts also said that Costco stock could cool off as investors wait for a possible membership fee increase next year and, potentially, another special dividend.

Known for its warehouse layouts and bulk-sale items, Costco was one of the early gainers in the pandemic era, after customers raided shelves last year in an effort to stock up on toilet paper, cleaning products and other goods.

Since then, memberships have increased, as rising prices prompt customers to seek bargains. Net sales last month rose 15.7% from a year ago. Same-store sales rose 14.1%. The company saw gains in its grocery business, as well as segments ranging from jewelry to tires to clothing.

Costco said inflation persisted, but noted a “moderation” last month, compared to October.

With ports and warehouses clogged and shipping containers not always easy to find, Costco stock analysts say the chain’s size works to its advantage. The company, along with Target and Walmart (WMT), are chartering ships in an effort to find ways around traffic jams along the coasts.

But with wages and transportation costs rising across the retail world, smaller discounters, like Dollar General (DG) and Dollar Tree (IBD) have recently taken steps to lean into higher prices.

Along with Costco stock, Walmart rebounded 1% during regular trading hours on Thursday. Shares slipped a fraction after the bell.

Target dipped less than 0.1% after hours. During the day, shares fell 0.85% to 237.56. The stock on Wednesday faded more than 8% below a 262.61 buy point of a cup-with-handle base, and triggering the automatic sell rule.

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