Costco Stock Jumps After Q4 Earnings: 4 Analysts React To Sales And Membership Momentum

Costco Wholesale Corporation COST shares traded higher by 2.2% on Friday after the company reported a fiscal fourth-quarter earnings beat.

On Thursday, Costco reported fiscal fourth-quarter adjusted EPS of $3.76 on revenue of $62.7 billion. Both numbers exceeded consensus analyst estimates of $3.76 and $61.4 billion, respectively. Revenue was up 17.4% from a year ago.

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Costco reported adjusted fourth-quarter same-store sales growth of 9.4%, excluding the impact of gasoline prices and foreign exchange. U.S. adjusted same-store sales growth for the quarter was 10.3%, Canada sales growth was 6.7% and other international sales growth was 7.3%.

Adjusted online sales in the quarter were up 8.9%.

For the full fiscal year, Costco reported 13.4% adjusted same-store sales growth, which included 13.6% U.S. sales growth and 42.6% online sales growth. Costco reported memberships of 60.7 million, up from 60.6 million in the previous quarter.

Impressive Growth: Bank of America analyst Robert Ohmes said Costco’s sales and membership growth should help the company offset inflation pressures in fiscal 2022.

“We expect comps to benefit from new club growth (COST plans to open 25 warehouses in F22) and continued strong membership trends (membership households reached 61.7mn in F4Q vs. 60.6mn in F3Q,” Ohmes wrote.

Morgan Stanley analyst Simeon Gutman said Costco is positioned to grow comps in the mid-single-digits in fiscal 2022, roughly in line with its long-term average.

“Earnings growth is crucial because COST is not likely to see valuation upside from here as: 1) growth is set to decelerate, and 2) the stock sports Retail-leading high 30s/low 20s PE and EV/EBITDA multiples, respectively on F'22 estimates,” Gutman wrote.

Market Share Opportunities: Raymond James analyst Bobby Griffin said nothing about the quarter changed the bullish Costco narrative.

“Costco's product mix (food/consumables and discretionary goods), clean balance sheet and sticky customer base (~91% U.S. renewal rate; millennial growth) position it well to continue to benefit and gain share,” Griffin wrote.

Telsey Advisory Group analyst Joseph Feldman said Costco closed out its fiscal year on a high note.

“Costco should remain a share gainer, with its solid sales, high membership renewal rates (~111.6MM members), and square footage growth of LSD,” Feldman wrote.

Ratings And Price Targets:

• Bank of America has a Buy rating and a $500 target.
• Morgan Stanley has an Overweight rating and a $510 target.
• Raymond James has an Outperform rating and a $490 target.
• Telsey has an Outperform rating and a $480 target.

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