Jeffries Lowers Target Price, EPS Estimates on Costco (COST) (Update)

Update (9:40 a.m.): Updated with Wednesday market open information.

NEW YORK (TheStreet) -- Jeffries lowered its target price on Costco  (COST) to $105, set a "hold" rating and lowered its EPS estimates. The firm cited Costco's promotional holiday period and continued pressure on fresh food margins as reasons for the downgrade.

The stock was falling 0.52% to $110.31 shortly after the market opened on Wednesday.

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Separately, TheStreet Ratings team rates COSTCO WHOLESALE CORP as a "buy" with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:

"We rate COSTCO WHOLESALE CORP (COST) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, increase in net income, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company shows weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 6.3%. Since the same quarter one year prior, revenues slightly increased by 5.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • COSTCO WHOLESALE CORP's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, COSTCO WHOLESALE CORP increased its bottom line by earning $4.63 versus $3.90 in the prior year. This year, the market expects an improvement in earnings ($4.84 versus $4.63).
  • The net income growth from the same quarter one year ago has exceeded that of the Food & Staples Retailing industry average, but is less than that of the S&P 500. The net income increased by 2.2% when compared to the same quarter one year prior, going from $416.00 million to $425.00 million.
  • The current debt-to-equity ratio, 0.44, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that COST's debt-to-equity ratio is low, the quick ratio, which is currently 0.51, displays a potential problem in covering short-term cash needs.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Food & Staples Retailing industry and the overall market on the basis of return on equity, COSTCO WHOLESALE CORP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • You can view the full analysis from the report here: COST Ratings Report

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