Shares in Costco (COST) sunk 2.51% in Thursday’s after-hours trading, even after the warehouse retail stock posted another very strong quarter.
Specifically, FQ4 GAAP EPS of $3.13 sailed past Street estimates by $0.32 (and came in much higher than last year’s $2.47), while revenue of $53.38B (up 12.4% Y/Y) also beat by $1.02B.
Most impressively, adjusted core comp growth came in at 14.1% (up 13.6% in the US, 12.6% in Canada and 18.8% internationally) while e-commerce surged 91.3%. Meanwhile gross margins were up slightly year-over-year (to 13.1% from 13.0%).
“This year’s fourth quarter was negatively impacted by incremental expense related to COVID-19 premium wages and sanitation costs of $281 million pretax ($0.47 per diluted share) and a $36 million pretax charge ($0.06 per diluted share) related to the prepayment of $1.5 billion of debt” the company stated.
Nonetheless analysts were impressed. Following the results RBC Capital’s Scot Ciccarelli reiterated his Costco buy rating while ramping up the price target from $400 to $412.
“Costco posted another very strong quarter with… strong earnings leverage due to the double-digit sales growth (EBIT $s up ~22% and would have been up ~34% excluding COVID-19- related expenses)” he cheered post-print.
According to Ciccarelli, unit growth is a highly underappreciated growth lever for the company. He estimates that the company can still expand by ~400–500 units in the US over time- and that its international expansion potential may even be larger.
“We remain bullish on Costco given its ultra-low markup process, massive buying scale, growing e-commerce business and “value” positioning in what will likely be a more difficult economic environment” the analyst concluded. (See COST stock analysis on TipRanks).
Overall analysts have a cautiously optimistic Moderate Buy consensus on COST stock, with 16 recent buy ratings offset by 7 hold ratings. The average analyst price target of $367 indicates 6% upside potential, with shares already up 18% year-to-date.
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