Deutsche Bank Reiterates Hold Rating on Costco Wholesale (COST)

Deutsche Bank is out with a research report this morning, where it reiterates its Hold rating on Costco Wholesale COST; it has a $69.00 price target on the stock, up from $67.00. The DB analysts cited the company's recent quarterly earnings report, which was “solid.” EBIT margins were up +26bp, driven by SG&A leverage (-19bp) and GM improvement (+10bp), despite rising costs in key fresh food categories like meat and produce. The analysts are adjusting their estimates higher. As for valuation, the analysts remarked, “Costco trades at 19.5x our new calendarized FY11 est of $3.55, which is slightly above its 5-yr FY average multiple of 18.8x. Our new $69 PT is based on (1) 17x multiple on our adjusted (ex-cash) cal. FY11 EPS est, plus (2) $10/share in ‘excess' cash.”