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Costco (COST) Q4 Earnings in Focus: Key Factors to Watch

Costco's (COST) fourth-quarter results are likely to reflect better price management, decent membership trends and increasing penetration of e-commerc...

This story originally appeared on Zacks

Costco Wholesale Corporation COST is likely to register an increase in the bottom line when it reports fourth-quarter fiscal 2021 numbers on Sep 23, after the closing bell. We note that the Zacks Consensus Estimate for fourth-quarter earnings per share has increased by a couple of cents over the past seven days to $3.55. The figure suggests growth of roughly 13.4% from the year-ago period.

This Issaquah, WA-based company has a trailing four-quarter earnings surprise of 7.7%, on average. In the last reported quarter, the company’s bottom line surpassed the Zacks Consensus Estimate by a margin of 20.1%.

Meanwhile, the Zacks Consensus Estimate for revenues is pegged at $62,812 million, indicating an improvement of 17.7% from the prior-year reported figure.

- Zacks

Key Factors to Note

Costco’s growth strategies, better price management, decent membership trends and increasing penetration of e-commerce business have been contributing to its upbeat performance. In fact, the company’s strategy to sell products at discounted prices has helped draw customers, who have been seeking both value and convenience amid the ongoing crisis. Cumulatively, these factors have been aiding this operator of membership warehouses in registering impressive sales run.

For the 16-week fourth quarter ended Aug 29, 2021, Costco registered net sales of $61.4 billion. This reflects an increase of 17.4% from $52.3 billion reported in the year-ago period. Comparable sales during the said period climbed 15.5%, reflecting increases of 14.9%, 19.5% and 15% in the United States, Canada and Other International locations, respectively.

The company has been rapidly adopting the omni-channel mantra to provide a seamless shopping experience, whether online or in stores. We note that e-commerce comparable sales increased 11.2% during the aforementioned period.

While aforementioned factors raise optimism about the outcome, margins still remain an area to watch. Analysts pointed out that any deleverage in SG&A rate, higher labor and occupancy costs, and increased marketing and other store-related expenses might have weighed on margins. Further, the impact of incremental wages and sanitation costs due to the coronavirus outbreak cannot be ignored.

What the Zacks Model Unveils

Our proven model predicts an earnings beat for Costco this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Costco has a Zacks Rank #2 and an Earnings ESP of +0.11%.

3 More Stocks With Favorable Combination

Here are some other companies you may want to consider as our model shows that these too have the right combination of elements to post an earnings beat:

Crocs CROX has an Earnings ESP of +1.20% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

General Mills GIS has an Earnings ESP of +0.36% and a Zacks Rank #3.

Darden Restaurants DRI has an Earnings ESP of +1.69% and a Zacks Rank #3.

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