NEW YORK (TheStreet) -- Costco Wholesale Corp. (COST) , the retailer that replaced American Express Co. (AXP) as its credit-card issuer in Canada, is considering a similar move with its larger U.S. portfolio, sources told Bloomberg.
Costco is seeking bids for both an issuer and a payments network for its U.S. cards, sources added. AmEx could be among the firms bidding on the contract, sources said.
In September, Costco struck a deal with Capital One Financial Corp. (COF) and MasterCard (MA) to issue co-branded credit cards in Canada when the retailer's contract with AmEx ends this year, Bloomberg noted. Costco notified customers that it will stop accepting all American Express cards in Canada on Jan. 1 after negotiations between the two companies to renew the contract fell through.
American Express was the only credit card accepted at Costco stores in Canada. AmEx has a separate contract with Costco in the U.S. The retailer operates 468 stores in the U.S. and Puerto Rico, and 88 in Canada, according to its website.
Shares of Costco closed down at $136.50 yesterday, while American Express shares are up 0.30% to $92.70 in pre-market trade today.
TheStreet Ratings team rates COSTCO WHOLESALE CORP as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:
"We rate COSTCO WHOLESALE CORP (COST) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, increase in net income, good cash flow from operations and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 2.8%. Since the same quarter one year prior, revenues slightly increased by 9.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
- COSTCO WHOLESALE CORP has improved earnings per share by 12.9% in the most recent quarter compared to the same quarter a year ago. 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 $4.66 versus $4.63 in the prior year. This year, the market expects an improvement in earnings ($5.15 versus $4.66).
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Food & Staples Retailing industry average. The net income increased by 13.0% when compared to the same quarter one year prior, going from $617.00 million to $697.00 million.
- Net operating cash flow has increased to $842.00 million or 49.55% when compared to the same quarter last year. In addition, COSTCO WHOLESALE CORP has also vastly surpassed the industry average cash flow growth rate of -11.37%.
- The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
- You can view the full analysis from the report here: COST Ratings Report