What to expect from Costco Wholesale Q4 earnings

Costco Wholesale Corporation (NASDAQ: COST) is set to release its fourth-quarter earnings results on Thursday after the market closes. The membership warehouses operator’s results will be benefited by higher merchandise sales to its members at lower prices that will result in more customer visits and higher spending per customer.

The launch of Costco’s first store in China turned out to be a huge success. After a crazy massive turnout in its first debut in China, the company restricted the number of China shoppers to 2,000. The company could turn beneficial with its new stores as the less risker subscription model would yield better productivity. Also, investors expect the company to share more details about its intention to start selling alternative meat products privately-held from Don Lee Farms.

The competition has been mounting for the retail players as e-commerce giants like Amazon (NASDAQ: AMZN) and Walmart (NYSE: WMT) are stealing away the customers. This has turned out to be a major headwind and led to a fall in malls’ traffic and change in consumer habits.

Apart from this, the company’s results are likely to be narrower than previously expected due to the rise in costs related to the ongoing trade war. However, the results will be benefited by low prices to members, along with the operating efficiencies achieved by volume purchasing, efficient distribution and reduced handling of merchandise.

The market experts believe that Costco’s long-term growth prospects will continue to remain fairly upbeat. They expect the company to largely manage the recent tariff headwinds quite nice. The company’s financial performance, which has been remarkable over the long term, has maintained an attractive return from the stock.

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Analysts expect the company’s earnings to increase by 7.60% to $2.54 per share and revenue will rise by 7.20% to $47.6 billion for the fourth quarter. The company has surprised investors by beating analysts’ expectations twice in the past four quarters. The majority of the analysts recommended a “strong-buy” or “buy” rating with an average price target of $292.

For the third quarter, Costco reported a 21% jump in earnings helped by higher revenue as well as a non-recurring tax item. The top line rose by 7.4% year-over-year driven by a 5.6% increase in adjusted comparable-store sales. It’s worth noting that Costco has reported a same-store sales growth of 5% or above in the last two years.

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