3 Costco Wholesale Analysts Give Their Takeaways On Mixed Results: What's Next?

Costco Wholesale Corporation COST Thursday reported revenues of $72.09 billion, topping Street expectations. However, the company’s gross margins contracted by around 80 basis points to 10.18%.

BofA Securities on Costco Wholesale

Analyst Robert Ohmes maintained a Buy rating and a price target of $605.

“Same-store sales increased +10.4% for the total company (ex-gas & FX) and +9.6% in the U.S. (ex-gas) driven by both traffic (+7.2% worldwide, +5.2% U.S.) and ticket gains (+6% worldwide, +10% U.S.),” Ohmes wrote in a note.

However, Costco Wholesale’s gross margins contracted, with core merchandise declines and a LIFO charge of $223 million, the analyst said. “In addition, there are no specific examples of easing inflation in COST’s Food & Sundries category (in contrast to the more discretionary categories),” he added.

Check out other analyst stock ratings.

Telsey Advisory Group on Costco Wholesale

Analyst Joseph Feldman reiterated an Outperform rating while keeping the price target unchanged at $590.

Costco Wholesale’s quarterly earnings were solid, “reflecting ongoing benefits from strong sales, high member loyalty, and efficient execution in a tough retail environment,” Feldman said in a note.

“We believe Costco is executing well in this challenging operating environment, as it helps its members save money on basics while enjoying great value on discretionary products,” the analyst mentioned. “The company should remain a share gainer, with its solid sales and high membership renewal rates,” he added.

BMO Capital Markets on Costco Wholesale

Analyst Kelly Bania reaffirmed an Outperform rating for the company and a price target of $600.

Costco Wholesale’s results were encouraging, which “gives bulls reasons to remain steadfast despite clear recession risks,” Bania wrote in a note.

“If COST shares were to pull back due to recessionary pressures, we would use any weakness to build/add to positions in COST shares,” she added.

“Costco's renewal rates, executive penetration, traffic, and long-term runway (2-3% annual unit growth) bodes well for the long-term outlook,” the analyst further mentioned.

COST Price Action: Shares of Costco Wholesale had declined by 2.74% to $473.84 at the time of publication Friday

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