Costco (COST) to Report Q4 Earnings: What's in the Cards?

Costco Wholesale Corporation COST is slated to report fourth-quarter fiscal 2016 results on Sep 29. The question lingering in investors’ minds is, whether the company will be able to deliver a positive earnings surprise in the quarter to be reported. Let’s see how things are shaping up prior to this announcement.

Zacks Model Shows Unlikely Earnings Beat

Our proven model does not conclusively show that Costco is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Costco has an Earnings ESP of -0.58% as the Most Accurate estimate stands at $1.72, while the Zacks Consensus Estimate is pegged higher at $1.73. Costco’s Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.

Factors Influencing this Quarter

Costco continues to be one of the dominant retail wholesalers based on its breadth and quality of merchandise offered. A differentiated product range enables the company to ensure an upscale shopping experience for its members, resulting in market share gains. Moreover, Costco continues to maintain a healthy membership renewal rate. It is also gradually expanding its e-commerce capabilities in the U.S., Canada, U.K., Mexico, Taiwan and Korea.

However, investors are worried about Costco’s comparable-store sales (comps) performance in the quarter to be reported. Costco reported flat comps for the 16-week period ended Aug 28, 2016. The company witnessed a flat and a 2% increase in comps across its U.S. and Canadian locations, respectively, offset by a 2% decline at its Other International locations. Costco experienced flat comps for the month of August (the four weeks ended Aug 28, 2016) following a 2% decline in July and flat comps in June. Moreover, on the revenue front, Costco has missed the Zacks Consensus Estimate in the last six consecutive quarters.

COSTCO WHOLE CP Price and EPS Surprise

COSTCO WHOLE CP Price and EPS Surprise | COSTCO WHOLE CP Quote

Stocks Poised to Beat Earnings Estimates

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

American Eagle Outfitters, Inc. AEO has an Earnings ESP of +2.44% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Burlington Stores, Inc. BURL has an Earnings ESP of +3.13% and a Zacks Rank #2.

Nordstrom Inc. JWN has an Earnings ESP of +5.66% and a Zacks Rank #2.

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