Costco Q3 Earnings Beat Expectations; Street Says Buy

Membership-only retail chain store operator Costco Wholesale Corporation (COST) reported better-than-expected earnings backed by strong consumer demand.

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Earnings for the quarter stood at $2.75 per share, an increase of 45.5% year-over-year, and surpassed the Street’s estimates of $2.34 per share.

Total revenue came in at $45.28 billion, up 21.4% from the prior-year quarter, and outpaced the Street’s estimates of $43.64 billion. Net sales increased 21.7% to $44.38 billion and membership fees grew 10.6% to $901 million.

Comparable sales (excluding impacts of gasoline prices and foreign exchange fluctuations) increased 15.1%, including an E-commerce comp sales rise of 63.6%.
(See Costco stock analysis on TipRanks)

Following the third-quarter results, Oppenheimer analyst Rupesh Parikh reiterated a Buy rating on the stock with a price target of $425, which implies 9.7% upside potential to current levels.

Parikh said, “We look very favorably upon COST’s long-term prospects. A few key factors underpin our views: 1) unique and improving consumer value proposition; 2) open-ended worldwide growth prospects; 3) leading competitive position poised to continue to drive share gains… However, given still difficult upcoming compares, cost pressures, and positive stimulus spending, the setup has gotten even more trickier. As a result, we view COST shares as appropriate for longer-term players.”

The Wall Street community has a Strong Buy consensus rating on Costco’s stock. That’s based on 18 Buys and 5 Holds. The average analyst price target of $408.38 implies 5.4% upside potential to current levels. Shares have gained 1.9% year-to-date.

Costco scores a “Perfect 10” from TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.