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Costco Stock Soars Higher as Traders Eye Q1 Earnings Report

By:Thomas Westwater

Investors are focused on Costco earnings due Thursday to gauge consumer health as the company nears a shift in leadership

  • Costco will report first-quarter earnings on Thursday, Dec. 14.
  • Investors expect $3.41 EPS on $56.7 billion in revenue, according to Bloomberg.
  • Same-store sales growth in the U.S. may impress investors as stock hits a fresh all-time high.

Costco Wholesale (COST) is scheduled to report first-quarter fiscal earnings on Thursday, Dec. 14, after market close. Given its sustainable and proven business model, there usually aren’t huge surprises for investors lately, but the numbers are informative as a proxy gauge for consumer health.

There is also an impending leadership change, putting more emphasis on the retail giant. CEO Craig Jelinek will be relieved by Ron Vachris, current president and chief operating officer (COO), on January 1.

What do investors expect?

The Bloomberg consensus figure for adjusted earnings per share (EPS) stood at $3.41 on Monday, Dec. 11, on revenue of $56.7 billion. It would mark an 11% expansion in year-over-year EPS growth and a 6% increase in revenue over the same period. Costco beat EPS estimates in six out of the last seven reports and revenue in five of the last seven.

Same-store sales—a closely followed metric that measures sales in existing stores open longer than a year—are expected to grow half a percent from the last quarter globally. In the United States, investors are much more bullish, expecting to see same-store sales to grow 12% for the period. The benefit comes amid a still-resilient U.S. labor market where consumers seek out savings amid an inflationary environment.

However, for the same reasons, executives are likely to point out continued headwinds to discretionary spending, especially for big-ticket items. Meanwhile, supply chain price pressures have eased, which should help Costco in its efforts to control costs—something investors are keenly focused on.

Trading Costco earnings

Costco hit a fresh all-time high to start the week on Monday, rising over 2% through midday trading, outpacing the S&P 500’s 0.29% gain. Currently, the stock holds an implied volatility rank (IVR) of 37.9, and the Dec. 15 expiration shows an expected move of +/- 16.75.

If you’re expecting price to remain within that expected move, trading an iron condor with the short strikes at 605/645, the trade, as of Monday, would give a probability of profit of 61% with a maximum profit of $122 and maximum loss of $378.


Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. @fxwestwater

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