Costco Is 'Choppy' Near Term, Rolls Out Special Dividend: Analysts Study Q1 Print

Shares of Costco Wholesale Corporation COST trader higher on Friday morning, along with other stocks that were on investors’ radar.

Costco Wholesale reported its fiscal first-quarter results amid an exciting earnings season. Here are some key analyst takeaways from the earnings release.

• Telsey Advisory Group analyst Joseph Feldman maintained an Outperform rating, while raising the price target from $625 to $700.
• Raymond James analyst Bobby Griffin reiterated an Outperform rating, while lifting the price target from $580 to $670.
• Oppenheimer analyst Rupesh Parikh reaffirmed an Outperform rating and price target of $675.

Check out other analyst stock ratings.

Telsey Advisory Group: Costco Wholesale reported strong earnings of $3.58 per share, representing 16% year-on-year growth and came in higher than Street expectations of $3.41 per share, Feldman said in a note.

“In 1QF24, the headline comp was up 3.8% and the core merchandise comp, ex-gas and FX, rose 3.9%, driven by the outperformance of consumables and sequential improvement in non-consumables,” the analyst stated. The company’s strong membership fee income growth of 8.2% and healthy membership renewal rates of 92.8% in the US and Canada and 90.5% worldwide were encouraging, he added.

Raymond James: Although Costco’s shares have outperformed year to date and the near-term is likely to “remain choppy,” the positive fundamentals of its business model “that make it a long-term compounder remain intact,” Griffin said.

Around 30 new U.S. and international club openings are estimated for fiscal 2024 and Costco’s clean balance sheet and strong free cash flows “leave management ample flexibility to grow and return capital to shareholders,” the analyst said.

“Costco’s product mix (~54% food/consumables), sticky customer base (92.8% U.S. renewal rate), and leading value proposition (illustrated by traffic growth, despite economic concerns), position it well to gain further market share in a wide variety of economic environments,” he added.

Oppenheimer: Costco announced a special dividend of $15 per share, higher than expectations of $10 per share, Parikh wrote.

“We have adjusted our estimates lower to reflect the loss of interest income associated with the larger dividend vs. what we modelled,” he said.

“For longer-term players, with COST shares trading consistent with peakish valuations, we would take advantage of any dips,” the analyst added.

COST Price Action: Shares of Costco Wholesale had climbed 3.88% to $655.26 at the time of publication on Friday.

Image: Courtesy of Costco