Advertisement
Canada markets closed
  • S&P/TSX

    22,167.03
    +59.95 (+0.27%)
     
  • S&P 500

    5,254.35
    +5.86 (+0.11%)
     
  • DOW

    39,807.40
    +47.29 (+0.12%)
     
  • CAD/USD

    0.7383
    -0.0003 (-0.05%)
     
  • CRUDE OIL

    83.11
    -0.06 (-0.07%)
     
  • Bitcoin CAD

    95,607.22
    -445.55 (-0.46%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • GOLD FUTURES

    2,254.80
    +16.40 (+0.73%)
     
  • RUSSELL 2000

    2,124.55
    +10.20 (+0.48%)
     
  • 10-Yr Bond

    4.2060
    +0.0100 (+0.24%)
     
  • NASDAQ

    16,379.46
    -20.06 (-0.12%)
     
  • VOLATILITY

    13.01
    0.00 (0.00%)
     
  • FTSE

    7,952.62
    +20.64 (+0.26%)
     
  • NIKKEI 225

    40,369.44
    +201.37 (+0.50%)
     
  • CAD/EUR

    0.6836
    -0.0007 (-0.10%)
     

Time to Buy Costco (COST) or Dollar Tree (DLTR) Stock as Earnings Approach?

Two of the more notable retailers reporting their quarterly results this week are Costco (COST) and Dollar Tree (DLTR) with both set to report on Thursday, May 25.

Costco and Dollar Tree stocks are off to solid starts this year with shares of DLTR up +10% to slightly top the S&P 500’s +9% while COST’s +6% has been respectable as well. Notably, shares of COST and DLTR have outperformed the Retail-Discount & Variety Markets’ virtually flat year-to-date performance.  

As recognizable leaders in their retail space let’s see if now is a good time to buy Costco or Dollar Tree stock as earnings approach.  

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

ADVERTISEMENT

Costco Q3 Preview

Buying in bulk appears to be favorable among consumers searching for packaged-sized discounts as high inflation is still a concern, especially among discretionary items.

To that point, Costco’s fiscal third-quarter earnings are projected to be up 5% year over year at $3.32 per share. The Zacks Expected Surprise Prediction (ESP) indicates Costco should reach its bottom-line expectations with the Most Accurate Estimate also having Q3 EPS at $3.32. Sales are expected to come in at $54.57 billion, up 4% from the prior-year quarter. 

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Dollar Tree Q1 Preview

With consumers still seeking value amid high inflation, Dollar Tree‘s low-priced variety stores may continue to thrive. However, there may still be lingering inventory issues at the company's Family Dollar storefronts which sell common consumer products at a modestly higher price range.

The Zacks Consensus for Dollar Tree’s fiscal first-quarter earnings is $1.51 per share which would be a  -36% decline from Q1 EPS of $2.37 a year ago.  Alluding to the Family Dollar inventory issues is that Q1 sales are expected to be up 5% YoY at $7.27 billion despite the bottom-line drop. The Zacks ESP does indicate Dollar Tree could exceed its Q1 EPS expectations with the Most Accurate Estimate at $1.53 a share.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Growth & Outlook

Costco’s earnings are now forecasted to rise 9% this year and jump another 8% in FY24 at $15.47 per share. On the top line, sales are projected to be up 6% in FY23 and rise another 5% in FY24 to $254.82 billion.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Looking at Dollar Tree, earnings are expected to dip -8% in its current fiscal 2024 but rebound and climb 19% in FY25 at $7.88 per share. Sales are projected to be up 7% in FY24 and rise another 4% in FY25 to $31.61 billion.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Bottom Line

Costco and Dollar Tree’s growth projections are still intriguing landing both stocks a Zacks Rank #3 (Hold) at the moment. The guidance in their quarterly reports will be crucial for more upside in their stocks and this is especially true for Dollar Tree amid inventory concerns. Still, holding on to Costco and Dollar Tree stock could be rewarding for longer-term investors.  

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Dollar Tree, Inc. (DLTR) : Free Stock Analysis Report

Costco Wholesale Corporation (COST) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research