Previewing & Trading Costco's Earnings

Costco Wholesale Corporation COST is set to report earnings tomorrow morning before the bell, and all eyes will be on the warehouse company's ability to grow earnings in the face of rising inflation, commodity costs, and a slowing U.S. economy. Wall Street analysts are looking for 77 cents per share on $20.07 billion, up from last year, when it reported earnings of 66 cents per share on $17.78 billion in revenues. This would be a jump of nearly 13% from a year ago. Guidance for the next quarter is expected to come in ever stronger, as the company is expected to earn $1.10 per share on $26.93 billion in revenues, according to Yahoo Finance. In the last 30 days, 12 analysts have raised their estimates on Costco, and 1 has done so in the past week. There has been no revisions lower during the same time frame. The company has been able to generate strong sales in light of a slowing U.S. economy, and consumers are gravitating more towards places like Costco, BJ's Wholesale BJ and Sam's Club WMT to help cut down on expenses, such as gas, and try to get more bang for their buck. Analysts will also be looking to hear whether Costco will raise their membership fees, something the company has not done all that frequently in the past. The international operations for Costco have been strong as well, and analysts and investors will be looking to hear anything about international expansion plans. Costco trades at 21 times 2012 earnings, and sports a 1.2% dividend yield. The company has been prudent using its cash, opting to do shareholder friendly moves, such as share repurchases and dividend payments. If Costco is able to report better than expected earnings, then BJ's, Wal-Mart, and perhaps even Target TGT may see a bit of a boost, as these one-stop shops become more prevalent in consumers lives in the face of rising costs. Costco Wholesale Corporation operates membership warehouses that offer a selection of branded and private label products in a range of merchandise categories in no-frills, self-service warehouse facilities.