Costco Wholesale (COST) Stock: Gaining Big On Strong Earnings

Costco Wholesale Corporation (NASDAQ: COST)

Costco Wholesale Corporation is having a strong day in the market today, and for good reason. The company reported earnings for the fourth quarter, beating analyst expectations and exciting investors. On top of that, Deutsche Bank weighed in with an overwhelmingly positive view. Today, we’ll talk about the news, what we’re seeing from the stock as a result, and what we can expect to see from COST ahead.

COST Gains Big On Strong Earnings

As mentioned above, Costo Wholesale is having an incredible day in the market today after releasing its earnings for the fourth quarter of the 2016 fiscal year. In the report, we learned that the company beat analyst expectations with regard to earnings per share and showing strong growth in revenue. Here’s what we saw…

  • Earnings Per Share – In terms of earnings per share, COST definitely did not disappoint. During the fourth quarter, analysts expected that the company would generate earnings in the amount of $1.73 per share. However, the company actually generated earnings in the amount of $1.77 per share; beating expectations by $0.04 per share.
  • Revenue – In terms of revenue, COST released relatively mixed results. During the fourth quarter, analysts expected that the company would generate revenue in the amount of $36.81 billion. However, the company generated revenue in the amount of $35.73 billion. While the figure did come in more than $1 billion below expectations, it did show growth in revenue in the amount of 2%.
  • Store Openings – Finally, in the release, Costco Wholesale said that it plans to open 9 new warehouses by the end of the calendar year.

Deutsche Bank Weighs In

Following the release of earnings results, Deutche Bank weighed in on COST in a positive way. In their note to investors, the investment bank reiterated the buy rating. Here’s a key snippet from that note…

On the call, COST highlighted that signups for new Visa (V) cards have outpaced expectations, spend on the card outside the club is above prior peak, the recent international fee raise adds $50 million of pretax income over a 23-month period…”

The investment bank went on to say that categories with highest online penetration are outperforming, renewal rates remain strong, core merchandise margins remain solid, and the pipeline for growth is plentiful.

How The Stock Reacted To The News

As investors, one of the first things that we learn is that the news moves the market. When positive news is released, we can expect to see gains in the stock associated with the news. Adversely, negative news will lead to declines. In the case of Costco Wholesale, the news was overwhelmingly positive. Not only did earnings come out ahead of expectations, analysts are weighing in, in a positive way. As a result, we’re seeing strong gains in the value of the stock. Currently (2:08), the stock is trading at $153.41 per share after a gain of $5.92 per share or 4.01% thus far today.

What We Can Expect To See Moving Forward

Moving forward, I have an overwhelmingly bullish opinion of what we can expect to see from Costco Wholesale ahead. At the end of the day, the company is performing well under less-than-supportive economic conditions. As time passes and the global economy improves, we’re likely to see more growth. All in all, I’m expecting to see gains in COST ahead.

What Do You Think?

Where do you think COST is headed moving forward? Join the discussion in the comments below!