Costco (COST) Stock Up on Earnings, Misses on Revenue

Shares of Costco Wholesale Corporation (COST) were up +3.39 or +2.30 percent to $150.56 per share in Thursday's premarket, after the company reported better than expected second quarter earnings and February sales results early this morning. Costco Wholesale stock closed at $147.17 per share, down -0.20 or -0.14 percent in Wednesday's regular trading session.

Originally founded as Price Club in San Diego, California in 1976, Issaquah, Washington based Costco Wholesale Corporation is a membership based warehouse club providing customers with a wide variety of consumer merchandise including food, apparel, consumer electronics, furniture and computers to name only a few.
The company operates 671 warehouse stores worldwide, with 474 in the United States and Puerto Rico, 88 in Canada, 34 in Mexico, 26 in the UK, 20 in Japan, 11 in Korea, 10 in Taiwan, 7 in Australia and one in Spain. As of last year, Costco Wholesale Corporation was the second largest retailer in the United States and the third largest in the world.

 Costco Wholesale reported fiscal 2015 second quarter net income of $598 million, or $1.35 per diluted share versus $463 million or $1.05 per diluted share in the same period one year ago. On an adjusted basis, the company earned $1.25 for the quarter beating the analyst consensus of $1.17 per share.

For the company's first half of its fiscal year, Costco reported net income of $1,094 million or $2.47 per diluted share compared to $888 million or $2.01 per diluted share in 2014's first half. Costco's revenue for the first half was $27,454 million, an increase of +4.4 percent versus the previous year's results. Analysts expected the company to report $27,571 million.

Richard Galanti, Costco's Chief Financial Officer said in the company's press release that, "Net income was positively impacted by a $57 million ($0.13 per diluted share) tax benefit in connection with February's special cash dividend to the extent received by the Company 401(k) plan participants. In addition, this quarter's net income was negatively impacted by a $14 million ($0.03 per diluted share) tax charge relating to an ongoing income tax matter."

Comparable store sales for the quarter increased +4 percent in the United States, but declined -2 percent internationally with net comparable sales of +2 percent in the quarter and +3 percent for the year's first half. Adjusting for negative impacts from foreign exchange and gasoline price deflation, comparable store sales increased +8 percent for the quarter and +7 percent for the first half of the year.

For the four week period in the month of February, Costco reported net sales of $8.18 billion compared to $7.9 billion in the same period one year ago, an increase of +4 percent. For the 26 week period ended on March 1st, the company reported net sales of $57.12 billion versus $54.22 billion for the same period last year, an increase of +4 percent.

Costco Wholesale stock is near its yearly closing high of $155.92 per share, which was made last month on February 4th. The company has beat analyst estimates for earnings in the past two quarters. With a price earnings ratio of 30 and yearly earnings per share of $4.81, the company's performance so far this year looks solid. Investors seem to agree, with this morning's action showing confidence and perhaps a near term rally that could test the stock's yearly high.

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Published on Mar 5, 2015
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2016. Content published with author's permission.

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