Financial Trading Blog
Stock of the day 04/03/2015 – Costco Wholesale Corp
Despite a strong Q1 earnings release in December, Costco fell nearly 2% to $140.26 in the aftermath as investors were unimpressed with its figures. This then led to a recent low of $137.37 in mid-December as it suffered in the market wide slump as Christmas approached. Come the New Year, and Costco had crept up, opening 2015 at $141.60; the stock then saw declines over January after the announcement of some disappointing sales figures. However, the surprise announcement of a ‘special’ $5 per share dividend led to a 3 day rally, seeing Costco grow around 9% to $155.96. Since then the stock has fallen off slightly, steadily trading around $147 for the past fortnight.
Costco’s biggest news since December came on Monday, as it announced a co-branding deal with Citigroup which sees the world’s largest consumer credit card issuer become the exclusive provider of Costco credit cards. On top of this, the company is replacing American Express with Visa as the store’s credit card network. This news was a significant boost to both Citigroup and Visa, with the former being upgraded to an ‘overweight’ rating at JP Morgan, whilst the latter reached all-time highs on the back of the news. This announcement should feature heavily in forward projections for the company, with Costco eager to play up the consumer benefits of the move.
In terms of its figures, Costco has been impressive in the last 2 quarters, beating analyst expectations both times. Its December Q1 2015 announcement saw $1.12 in earnings per share, a big increase on the previous year’s $0.96, alongside a total revenue rise of 7.4% as sales by the same amount. Despite international sales dragging down strong US figures in December and January, leading to 3% growth in the former and a flat performance in the latter, forecasts are still positive for Q2. Costco’s earnings per share are expected to be $1.18, with 5.4% growth in revenue to $27.74 billion.
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