Costco (COST) released a strong fourth quarter report beating Wall Street analysts expectations. However the retailer’s stock price fell by 2 percent. CWEB analysts have studied the stock and report why the shares of Costco fell by over 2 percent.
On Friday Costco released its fourth quarter report. The quarter ending August showed an increase in earnings, revenue, comparable sales in the US as well as membership income. However, the stock fell by roughly 2 percent after the report.
Costco reported an earnings of $5.87 per diluted share. This is an increase of 11 percent from the same quarter, a year ago, when earnings were $5.29 per diluted share. It also said that the quarter’s revenue was 84.4 billion which is also an 8 percent increase from a year ago when revenue reported was $79.7 billion. It exceeded Wall Street estimates of $5.80 earnings per share and revenue of $86.06 billion.
Costco outperformed closest retail rivals such as Walmart and Target in comparable sales in the US and saw a 5.1 increase, ahead of its competitors with Walmart reporting 4.6 percent growth and Target reported a1.9 percent drop in sales, while membership rose by 14 percent to $1.7 billion. The retailer know for selling premium product in store also proved its worth online with e-commerce climbing up 13.6 percent.
Costco stock has advanced 2.9 percent year to date while the average stock of the retail industry has risen by 3.8 percent. CWEB analysts note that some investors might consider the value of Costco shares to be overestimated leading to slower growth.
Costco has seen slower growth in the past three quarters. It trades at 52x of its earnings and 59x free cash flow. It has a low cash flow yield of 1.8 percent and this could also be a factor for the slow performance of its stock.
