Costco Earnings Preview: 4% Stock Price Move Expected
Costco Earnings Preview: 4% Stock Price Move Expected
By:Mike Butler
Focal points for this earnings call will likely be subscription factors, growth initiatives, and price-management strategies
- Costco Wholesale will report quarterly earnings on Thursday, March 7 at 3:15 p.m. CDT.
- Experts expect Costco to report EPS of $3.63 on $59.13 billion in revenue.
- The bulk discount all-in-one store has seen a significant stock price rally to begin 2024.
When you look at a price chart of Costco Wholesale (COST), you may think you're looking at one of the high-flying tech stocks like Nvidia (NVDA), Advanced Micro Devices (AMD), or a chart of bitcoin (BTC) prices.
Costco has had an extraordinarily strong start to the 2024 trading year opening at $655.58 and sitting over $100 higher today.
Costco will report quarterly earnings on Thursday, March 7 at 3:15 p.m. Central Time. Analysts expect the warehouse club retailer to report earnings per share (EPS) of $3.63 on $59.13 billion in revenue. Both estimates are higher than for last quarter's report, which came in at an EPS of $3.58 on $57.80 billion in revenue, respectively.
Shareholders got a dividend last quarter
Last quarter, Costco announced a special cash dividend which surprised the stock market.
"The company also announced that the board of directors has declared a special cash dividend on Costco common stock of $15 per share, payable Jan. 12, 2024, to shareholders of record as of the close of business on Dec. 28, 2023. The aggregate amount of the payment will be approximately $6.7 billion."
We saw Meta Platforms (META) announce a similar surprise dividend of $0.50 per share recently, and as we saw with Costco's last earnings call the market seems to look favorably upon them.
The expected stock price move based on current implied volatility is +-$36.32, which is just under 5% of the current stock price. This expected move is relatively low compared to other stocks that recently reported earnings that had an expected move that exceeded 10% of the stock price. With that said, we can see that this earnings call does bear weight, as the expected move through the April options cycle is +-$52.62 and +-$120.18 through December.
Bullish on Costco for earnings
Everybody who has a Costco membership seems to love it, and that's apparent in the strong annual renewal percentage the company relies on. Many analysts expect an earnings beat this time around for Costco. If it can keep costs at bay with a sound strategy and paint a pretty picture for the rest of 2024, we may see this stock price keep moving in a bullish manner.
Bearish on Costco for earnings
As inflationary pressure remains, one crucial factor that Costco will have to overcome is the price at which they offer goods, and the wages they pay their employees.
In a low margin business like the grocery sector, minor changes can make a significant impact on the bottom line. If Costco fails to deliver on this earnings call from an EPS and/or revenue perspective—and lowers guidance through the rest of the year—we may see the stock take a bearish turn.
Tune in to Options Trading Concepts Live at 11 a.m. CDT on Thursday for a full breakdown of options strategies ahead of the Costco earnings call.
Mike Butler, tastylive director of market intelligence, has been in the markets and trading for a decade. He appears on Options Trading Concepts Live, airing Monday-Friday. @tradermikeyb
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