Costco Q1 Earnings Preview: Membership Fee Increase In Focus With Shares At All-Time Highs

Retailer Costco Wholesale Corporation COST could show the early impact of a membership fee increase when the company reports first-quarter financial results Thursday after market close.

Earnings Estimates: Analysts expect Costco to report first-quarter revenue of $62.12 billion, up from $57.8 billion in last year's first quarter, according to data from Benzinga Pro.

The company missed analyst revenue estimates in the fourth quarter. It also missed estimates in five of the last 10 quarters.

Analysts expect the company to report first-quarter earnings per share of $3.79, up from $3.48 in last year's first quarter. The company has beaten analyst estimates for earnings per share in seven straight quarters and nine of the last 10 quarters overall.

What Analysts Say: Costco's unmatched value proposition, strong gross margins and a loyal customer base make the stock a core holding, JPMorgan analyst Christopher Horvers said in a recent analyst note.

The analyst maintained an Overweight rating on Costco and raised the price target from $945 to $1,090.

Horvers highlighted the company's membership renewal rate of around 90%.

Along with the strength of gross margins and the membership renewal rates, Costco also has the potential to double its store count, the analyst added.

Bank of America analysts recently maintained a Buy rating and price target of $962 saying the company is well-positioned to benefit from a focus on value by consumers in the 2024 holiday season.

Here are other analyst ratings on Costco and their price targets:

Oppenheimer: Reiterated Outperform rating, raised price target from $980 to $1,075
Jefferies: Maintained Buy rating, raised price target from $1,050 to $1,145
Stifel: Maintained Buy rating, raised price target from $935 to $1,000
Wells Fargo: Maintained Equal-weight rating, raised price target from $850 to $950
Baird: Maintained Outperform rating, raised price target from $975 to $1,075
Telsey: Maintained Outperform rating, raised price target from $1,000 to $1,050

Key Items to Watch: Costco's first-quarter results will cover the months of September, October and November. The company announced a membership fee increase earlier this year with the change going into effect on Sept. 1.

While it will take time for all current members to pay the higher price as their renewals come up, Thursday will mark the first quarterly results with the higher amount, which could provide a boost to the higher-margin membership revenue line.

Membership fees were $1.512 billion in the fourth quarter.

A Placer.ai report showed that foot traffic at Costco stores was up 7.2% year-over-year in the third calendar quarter of the year with September up 4.5% year-over-year and October up 3.6% year-over-year.

Compare that to foot traffic at its peers: Sam's Club (+5.2%), BJ's Wholesale (+5.9%), Target (+1.0%) and Walmart (+0.9%).

Costco’s monthly sales reports have shown strong sales growth and Thursday's report could further illustrate that.

Investors and analysts will be watching to see if there are any comments on market share gains and new customer growth that could show taking customers from other retailers.

Price Action: Costco stock is up 1% to $1,003.19 on Wednesday versus a 52-week trading range of $623.22 and $1,007.80. The stock hit the new 52-week and all-time high of $1,007.80 earlier in Wednesday's trading session. Costco stock is up 54% year-to-date in 2024.

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