Expectations from Costco Wholesale Corporation (NASDAQ: COST) have moderated, thus increasing confidence that the company will be able to weather the food deflation and post better-than-expected EPS for the fourth quarter. The company is scheduled to announce its results after the market closes on Thursday.
Most of the brokerage houses have retained their rating on the company's stock though some of them have reduced their EPS estimate. For instance, Baird Equity Research slashed its EPS estimation from $1.73 to $1.69 for the fourth quarter. Similarly, the consensus EPS estimate has been reduced from $1.74 about thirty days back to $1.73 a week ago.
Currently, the Street expects Costco to report EPS of $1.73 on revenue of $36.81 billion . In the last four quarters, its EPS missed twice and topped in the other two quarters. On August 31 , the company indicated fourth quarter sales of $35.7 billion .
Related Link: David Bartosiak's Costco Trade
In a research note, BMO Capital said, "Despite food deflation pressure, we believe Costco is less exposed compared with pure grocery peers given its smaller exposure (56 percent of sales) and higher exposure to international (28 percent of sales)."
While admitting retail backdrop slowed down, Baird analyst sees prospects for "better traffic/sales later this year as compares start to ease and members increasingly recognize the benefits of the new co-branded Visa card."
Another brokerage, Citigroup CFO viewed that North American cards, including Costco co-branded card, topped expectations in the third quarter.
The stock has already lost about 10 percent in the one-month period and could well turn into a buying opportunity. However, much would depend on the outlook to be provided by the wholesaler. Analysts are looking for an EPS of $5.96 on revenue of $128.52 billion for fiscal year 2017.
The rating and price targets of different brokerages are given below:
BMO reaffirmed an Outperform rating with a price objective of $180 .
Baird Equity Research maintains an Outperform rating and a target price of $175 .
Barclays retained its Equal-Weight rating with a price tag of $158 .
At time of writing this, the stock shed $0.79 , or 0.53 percent, to $148.62
