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Category: Stock Market and Costco Wholesale
Date: 4 October 2019 Stock Price: $289 We take a look at the 4th quarter earnings report of their 2019 fiscal year of Costco Wholesale, one of the worlds largest retailers that operates 783 warehouses, of which 544 of them are located in the United States.
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About Costco Wholesale
Costco currently operates 783 warehouses, including 544 in the United States and Puerto Rico, 100 in Canada, 39 in Mexico, 29 in the United Kingdom, 26 in Japan, 16 in Korea, 13 in Taiwan, 11 in Australia, two in Spain, one in France, one in Iceland, and one in China. Costco also operates e-commerce web sites in the U.S., Canada, the United Kingdom, Mexico, Korea and Taiwan.
Overview of Costco's latest earnings report
- Total Revenue: $47.498 billion (up from $44.411 billion for the same quarter of the previous year)
- Total Revenue increased by 6.9% over the last 12 months
- Operating expenses: $46.035 billion (up from $42.903 billion for the same quarter of the previous year)
- Cost of sales increased by 7.3% over the last 12 months
- Net income: $1.097 billion (up from $1.043 billion for the same quarter of the previous year)
- Diluted earnings per share: $2.47 (up from $2.36 per share for the same quarter of the previous year)
- Diluted weighted-average shares outstanding: 443.400 million (up from 442.427 million for the same quarter of the previous year)
- Cash and cash equivalents: $8.384 billion
- Cash and cash equivalents per share: $18.90
- Cash and cash equivalents makes up 6.54% of Costco's market capital
- Cash and cash equivalents makes up 18.46% of Costco's total assets
- Accounts receivable: $1.535 billion
- Accounts receivable makes up 3.38% of Costco's total assets
- Inventories: $11.395 billion
- Inventories makes up 25.1% of Costco's total assets
- Stockholders equity of Costco: $15.584 billion
- Stockholders equity per share for Costco : $35.14
- So Costco is trading at 8.25 times it stockholders equity per share which is well within the expected range of between 2 and 4 times most companies tend to trade at.
- Cash generated from operations (for 2018 year as we cannot find the 2019 numbers on their website); $5.77 billion
- Cash generated from operations per share: $13.01
Costco Wholesale's management commentary on the results
ISSAQUAH, Wash., Oct. 03, 2019 (GLOBE NEWSWIRE) -- Costco Wholesale Corporation (“Costco” or the “Company”) (Nasdaq: COST) today announced its operating results for the 16-week fourth quarter and the 52-week fiscal year, ended September 1, 2019.
Net sales for the quarter were $46.45 billion, an increase of 7.0 percent from $43.41 billion during the similar period last year. Net sales for the fiscal year were $149.35 billion, an increase of 7.9 percent from $138.43 billion during the similar period last year.
Net income for the fourth quarter was $1,097 million, or $2.47 per diluted share, compared to $1,043 million, or $2.36 per diluted share, last year. This year’s fourth quarter was negatively impacted by a $123 million pre-tax reserve to SG&A ($96 million after-tax), or 22 cents per diluted share, related to a product tax assessment.
Net income for the fiscal year was $3.66 billion, or $8.26 per diluted share, compared to $3.13 billion, or $7.09 per diluted share, in the prior year. As previously disclosed and mentioned above, this year's net income was impacted by a net benefit of $30 million or $0.07 per diluted share from primarily non-recurring items. Last year was positively impacted by a first quarter tax benefit of $41 million or $0.09 per diluted share
Net sales for the quarter were $46.45 billion, an increase of 7.0 percent from $43.41 billion during the similar period last year. Net sales for the fiscal year were $149.35 billion, an increase of 7.9 percent from $138.43 billion during the similar period last year.
Net income for the fourth quarter was $1,097 million, or $2.47 per diluted share, compared to $1,043 million, or $2.36 per diluted share, last year. This year’s fourth quarter was negatively impacted by a $123 million pre-tax reserve to SG&A ($96 million after-tax), or 22 cents per diluted share, related to a product tax assessment.
Net income for the fiscal year was $3.66 billion, or $8.26 per diluted share, compared to $3.13 billion, or $7.09 per diluted share, in the prior year. As previously disclosed and mentioned above, this year's net income was impacted by a net benefit of $30 million or $0.07 per diluted share from primarily non-recurring items. Last year was positively impacted by a first quarter tax benefit of $41 million or $0.09 per diluted share
Costco Wholesale (NASDAQ: COST) stock price history
The image below, obtained from Google, shows the stock price history of Costco Wholesale for the last 5 years. And it's been a very good time for Costco stockholders. 5 years ago the stock was trading at around $129 a stock and its currently trading at $289 a stock. That's a very strong return of 124% provided by Costco over the last 5 years. The stock of Costco is trading at a lot closer to its 52 week high of $307.34 than it is to its 52 week low of $189.51 which to us is a clear indication that the short term sentiment and momentum of Costco stock is very positive. But it must be saids markets reacted negatively in pre-market trade with the stock being down -1.64% or -$4.75
Recent coverage of Costco Wholesale
The extract below shows some of the latest coverage on Costco Wholesale obtained from TheStreet.com
Costco Wholesale Corp. (COST) shares were indicated lower in pre-market trading Friday after the discount hypermarket posted softer-than-expected fourth quarter sales that offset solid earnings and membership growth. Costco said diluted earnings for the three months ending on September 1, the company's fiscal fourth quarter, came in a $2.47 per share, up 4.6% from the same period last year. Stripping away 22 cent tax-related charge, which the company disputes, earnings were pegged at $2.69 per share, well ahead of the Street consensus forecast of $2.56. Group revenues, Costco said, rose 7% to $47.5 billion, but fell just shy of analysts' forecasts of a $47.7 billion tally.
Costco said comparable sales rose 5.1%, missing the Refinitiv forecast of 5.25%, but membership renewal rates in both the U.S. and Canada (90.9%) and in markets around the world (88.4%) continued to trend near record highs. Costco is also planning to open a second outlet in Shanghai, where it has 20,000 registered members, and said it was working to mitigate the impact of import tariffs linked to the U.S.-China trade dispute.
"Since the beginning of these tariffs over a year ago, we continue to be active in managing and we're possibly mitigating the impact where we can" CFO Richard Galanti told investors on a conference call late Thursday. " In some cases, we've reduced our commitments on certain items. And again, just on the impact of what we expect, we look at alternative country sourcing where possible and feasible and although again, there's a limited amount of that ability to do that."
Read the full article here
Costco Wholesale Corp. (COST) shares were indicated lower in pre-market trading Friday after the discount hypermarket posted softer-than-expected fourth quarter sales that offset solid earnings and membership growth. Costco said diluted earnings for the three months ending on September 1, the company's fiscal fourth quarter, came in a $2.47 per share, up 4.6% from the same period last year. Stripping away 22 cent tax-related charge, which the company disputes, earnings were pegged at $2.69 per share, well ahead of the Street consensus forecast of $2.56. Group revenues, Costco said, rose 7% to $47.5 billion, but fell just shy of analysts' forecasts of a $47.7 billion tally.
Costco said comparable sales rose 5.1%, missing the Refinitiv forecast of 5.25%, but membership renewal rates in both the U.S. and Canada (90.9%) and in markets around the world (88.4%) continued to trend near record highs. Costco is also planning to open a second outlet in Shanghai, where it has 20,000 registered members, and said it was working to mitigate the impact of import tariffs linked to the U.S.-China trade dispute.
"Since the beginning of these tariffs over a year ago, we continue to be active in managing and we're possibly mitigating the impact where we can" CFO Richard Galanti told investors on a conference call late Thursday. " In some cases, we've reduced our commitments on certain items. And again, just on the impact of what we expect, we look at alternative country sourcing where possible and feasible and although again, there's a limited amount of that ability to do that."
Read the full article here
Costco Wholesale (NASDAQ: COST) latest stock valuation
So what is Costco Wholesale (NASDAQ: COST) stock worth based on the release of their latest earnings report? Based on their earnings report and the guidance provided our valuation models provide a target (full value) price for Costco of $221 a stock. We therefore believe that the stock is overvalued.
We usually suggest long term investors look to enter a stock at least 10% below our target (full value) price which in this case is $221. So a good entry point into Costco stock would be at $198.9 or below. We expect the stock of Costco Wholesale to pull back from current levels to levels closer to our target (full value) price in coming weeks and months as even at $221 we were fairly generous regarding the group's short and medium term prospects in our valuation models.
We usually suggest long term investors look to enter a stock at least 10% below our target (full value) price which in this case is $221. So a good entry point into Costco stock would be at $198.9 or below. We expect the stock of Costco Wholesale to pull back from current levels to levels closer to our target (full value) price in coming weeks and months as even at $221 we were fairly generous regarding the group's short and medium term prospects in our valuation models.