Costco Wholesale Corporation (COST) Is a Trending Stock: Facts to Know Before Betting on It

Costco (COST) is trending on Zacks.com, with shares down 3.5% over the past month, while the S&P 500 composite is up 1.7%. Current fiscal year earnings are projected to increase 12% to $18.04 per share, with revenue expected to grow 8% to $274.91 billion; however, the stock currently holds a Zacks Rank #3 (Hold), suggesting it may perform in line with the broader market in the near term and is graded D, indicating it is trading at a premium to its peers.

Analysis

Costco Wholesale Corporation (COST) has recently exhibited share price underperformance, declining 3.5% over the past month, in contrast to a 1.7% gain for the S&P 500 composite and a 1.8% loss for the Zacks Retail - Discount Stores industry. Despite this, the company's fundamental growth outlook appears solid. Current quarter earnings are projected at $5.86 per share, representing a 13.8% year-over-year increase, though the Zacks Consensus Estimate for this period has seen a minor -0.3% downward revision in the last 30 days. For the current fiscal year, consensus earnings are forecasted to reach $18.04 per share, a 12% year-over-year growth, with this estimate having been revised upwards by 0.5% over the past month. Looking ahead to the next fiscal year, earnings are expected to grow by 10.3% to $19.9 per share, an estimate that also saw a +0.7% revision in the last 30 days. Revenue growth projections remain positive, with an anticipated 7.7% year-over-year increase to $85.83 billion for the current quarter, and +8% and +7.2% growth forecasted for the current and next fiscal years, respectively. Costco has a track record of exceeding market expectations, having surpassed consensus EPS and revenue estimates in three of the last four reported quarters. However, the stock currently holds a Zacks Rank #3 (Hold), suggesting its performance may align with the broader market in the near term, and it carries a Zacks Value Style Score of D, indicating it is trading at a premium relative to its peers.

Key Decisions for Investors

• Investors should note the divergence between Costco's recent stock underperformance and its strong projected earnings and revenue growth, with the Zacks Rank #3 (Hold) suggesting a neutral near-term outlook.
• The premium valuation, as indicated by a Zacks Value Style Score of D, warrants careful consideration; prospective investors might await a more attractive entry point or further confirmation of sustained growth justifying the higher multiples.
• Given the positive earnings estimate revisions for the current and next fiscal years and a history of earnings surprises, existing shareholders may consider holding their positions while closely monitoring upcoming earnings reports and any shifts in analyst sentiment.