Costco’s stock is higher because the earnings were good enough

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Costco’s fiscal fourth quarter profits exceeded estimates. Stocks, which are higher in after-hours trading, have crushed the S&P 500 in recent years.

Mario Tama / Getty Images

Stock in retail giant


Wholesale Costco

is up after the retail giant beat Wall Street’s earnings forecast for its fiscal fourth quarter, reported Thursday evening.

The pace looks good enough to keep the stock in its current range, despite the strong performance of stocks in recent months.

Costco stock holds, up about 0.3% in after-hours trading. Since the company last reported earnings in May, Costco shares have gained about 17%. The


S&P 500

and


Dow Jones Industrial Average

gained around 6% and 1%, respectively, over the same period.

Costco reported earnings per share of $ 3.76 on revenue of $ 62.7 billion. Wall Street was looking for EPS of $ 3.58 on $ 61.4 billion in sales. A year ago, in the comparable quarter, Costco had EPS of $ 3.51 on revenue of $ 53.4 billion.

Investors should be pleasantly surprised by the initial reaction. Costco shares typically drop after a profit report. Prior to the just released fiscal fourth quarter, the stock had fallen nine of the last 12 published quarters. That didn’t stop the title from winning in the long run, however. Stocks have returned almost 27% per year on average over the past three years. The S&P 500 has returned around 17% per year on average over the same period.

The management hosts a conference call at 5 p.m. Eastern time to discuss the results. Investors will likely focus on profit margins. Costco’s gross profit margin was approximately 12.6% in the quarter. This was down from 12.95% reported in the previous quarter, which ended in May.

Inflation in labor costs and supply chain constraints result in higher costs for many businesses, including retail businesses.

Another topic of discussion will be the slowdown in growth resulting from frantic shopping amid Covid-19 lockdowns and travel restrictions in 2020. The company’s e-commerce growth has reached around 8.9% over the years. last four months, which is the statistic reported by the company. For the full year, however, e-commerce sales increased 43%.

As of Thursday, Costco stock has risen about 20% year-to-date, slightly better than comparable gains across the market.

Write to Al Root at [email protected]


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