Costco (COST) Stock Shows Volatility Following April Sales Results

NEW YORK (TheStreet) -- Costco (COST) shares are flat at $144.77 in early market trading on Thursday, matching its flat same store sales results for the month of April that the company reported before the opening bell.

The big box retailer said that stores open at least a year had flat year over year sales, missing analysts' expectations of a 0.3% increase. The company said the weaker-than-expected quarter was due to international currency headwinds and lower gas prices.

When taking out currency and gas price considerations, the company reported a 7% increase in domestic same store sales while international sales increased by 9%. Total revenue for the period increased 2% to $8.75 billion.

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, impressive record of earnings per share growth, compelling growth in net income, notable return on equity and good cash flow from operations. We feel these strengths outweigh the fact that the company shows low profit margins."

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

  • COST's revenue growth has slightly outpaced the industry average of 0.5%. Since the same quarter one year prior, revenues slightly increased by 4.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • COSTCO WHOLESALE CORP has improved earnings per share by 28.6% 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 ($5.24 versus $4.66).
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Food & Staples Retailing industry average. The net income increased by 29.1% when compared to the same quarter one year prior, rising from $463.00 million to $598.00 million.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Food & Staples Retailing industry and the overall market, COSTCO WHOLESALE CORP's return on equity exceeds that of both the industry average and the S&P 500.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. 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
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