Costco Posts 3rd Quarter Results

Costco beat consensus on earnings but missed on revenue

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Costco Wholesale Corp. (COST, Financial) beat consensus on earnings for the third quarter of fiscal 2018, however, its stock fell 2.03% in after-hours trading on Thursday.

Costco posted diluted earnings per share of $1.70 while analysts expected a net profit of $1.69 per share. The beat produced a positive surprise of 0.8%.

For the third quarter, Costco reported a revenue of approximately $31.62 billion, which was a 12.1% growth from the comparable of fiscal 2017. However, the company missed expectations on the third-quarter revenue by $220 million.

The chart below shows the trend in Costco’s total revenue over the last five third quarters Costco reports its fiscal year from September to August.

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In the third quarter, the U.S. wholesale hypermarket chain company reported a 10.2% year-over-year increase in comparable sales, including items of gas, inflation and foreign exchange. When gas, inflation and foreign exchange items are excluded, the jump is only 7% year-over-year.

Comparable sales including gas, inflation and foreign exchange were up 9.7% in the U.S. and 11.3% in Canada. Those excluding gas, inflation and foreign exchange were up 7.7% and 4.8%.

During the reporting period, international sales jumped 11.8% and 5.8% year-over-year respectively with and without gas, inflation and foreign exchange items. E-commerce sales rose 36.8% and 35.5%, respectively with and without gas, inflation and foreign exchange items.

Membership revenue, which was approximately 2.3% of total revenue, increased 14.4% to $737 million.

Costco had approximately $7 billion in cash on hand and securities. Costco’s total assets and liabilities were valued at $39.61 billion and $27.16 billion. Total current assets were valued at $19.69 billion while total current liabilities were valued $19.41 billion. As a result, the current ratio is 1.01, a 46.4% improvement from the previous quarter, versus an industry average of 1.20. The company reported a long-term debt of $6.49 billion while the total equity was worth $12.45 billion. The long-term debt to equity ratio is 52.13%.

Costco Wholesale Corp.stood at $196 a share, down 1% on Friday. The stock climbed 10% for the 52-weeks through May 31 but underperformed the S&P 500 index by 1.6%. The stock in Costco is trading above the 200, 100 and 50-SMA lines:

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The stock reports a 52-week range of $150 to $201.77 per share. The stock is not cheap at the moment. My recommendations is to buy the stock as it approaches any meaningful weakness.

Shareholders are receiving a quarterly cash dividend of 57 cents per share. The quarterly distribution leads to a forward annual dividend of $2.28 per share with a yield of 1.14%. The industry median for the forward dividend yield is 2.22%, according to GuruFocus.

(Disclosure: No positions.)