Costco Wholesale (NASDAQ:COST) is set to open up slightly on Friday, just over a week after the company released a solid earnings report. The warehouse-style retailer beat analysts’ expectations on both earnings and revenue.
There’s no question: Costco stock is a solid performer, which is why it gets a A ranking in my Portfolio Grader.
But don’t just take my word for it — see for yourself why I’m bullish on Costco stock these days, and why I think it will fare better than most as the market whipsaws on news about the coronavirus from China.
Costco’s Earnings Report
Costco reported second-quarter earnings of $2.10 per share, with sales of $38.3 billion. That beat consensus estimates of $2.07 per share and expected sales of $38.2 billion.
Perhaps not surprisingly, Costco sales saw a big jump in late February.
“We attribute this to concerns over the coronavirus and estimate the positive impact on total and comparable sales to be approximately three percent,” the company wrote in a statement.
In a conference call after the earnings report, company officials said the coronavirus-related demand is continuing.
“Members are turning to us for a variety of items associated with preparing for and dealing with the virus such as shelf stable dry grocery items, cleaning supplies, Clorox and bleach, water, paper goods, hand sanitizers, sanitizing wipes, disinfectants, health and beauty aids, and even items like water filtration and food storage items,” CFO Richard Galanti said.
The Outlook for 2020
Costco has been a reliable performer, gaining 20% over the last 12 months.
With a market capitalization of $124 billion, COST stock is a relatively expensive one. It has a price-earnings ratio greater than 37 and a price-book value of 8.8.
Notably, the company did not issue guidance for 2020. But Costco’s short-term success will be contingent on its ability to maintain production and distribution lines in China. And fortunately, China is showing signs of emerging from the Covid-19 wave.
Galanti says the company’s warehouses have mostly remained open. Two locations in South Korea and its warehouse in Shanghai are the exceptions.
“At this point, it’s hard to quantify what the financial impact will be for our future results — to our future results,” he said. “Again, the first week-and-a-half of this fiscal quarter, it’s been — the last week-and-a-half has been quite good with the sales, but we’ll see what tomorrow brings.”
The Bottom Line on Costco Stock
Costco has been a longtime winner. Plus, it is now one of a few companies on Wall Street that is relatively immune to coronavirus fears. As long as people are lining up at Costco to get cleaning supplies, basic staples and water, then Costco will have some insulation from the market volatility.
And in the future, Costco is committed to growing its presence in China. Before it was temporarily closed for the coronavirus, Costco’s Shanghai location had one of the highest membership bases in the chain. It’s an extremely popular location. That bodes well for Costco to expand its footprint in the lucrative Chinese market.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.