Costco Beats on Revenue, Matches Expectations on EPS (COST)

Costco Beats on Revenue, Matches Expectations on EPS

Costco (Nasdaq: COST ) reported earnings on Dec. 8. Here's what you need to know.

The 10-second takeaway
For the quarter ended Nov. 20 (Q1), Costco beat expectations slightly on revenues and met them on EPS. Margins contracted across the board.

Revenue
Costco booked revenue of $21.6 billion. The 14 analysts polled by S&P Capital IQ expected to see sales of $21.4 billion.

Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions.

EPS
Non-GAAP EPS came in at $0.80. The 20 earnings estimates compiled by S&P Capital IQ predicted $0.80 per share on the same basis. GAAP EPS of $0.73 for Q1 were 2.8% higher than the prior-year quarter's $0.71 per share.

Source: S&P Capital IQ. Quarterly periods. Figures may be non-GAAP to maintain comparability with estimates.

Margins
For the quarter, gross margin was 12.5%, 40 basis points worse than the prior-year quarter. Operating margin was 2.5%, 20 basis points worse than the prior-year quarter. Net margin was 1.5%, 10 basis points worse than the prior-year quarter.

Source: S&P Capital IQ. Quarterly periods.

Looking ahead
What does the future hold?

Next quarter's average estimate for revenue is $22.7 billion. On the bottom line, the average EPS estimate is $0.88. (There are 16 revenue estimates and 22 EPS estimates.)

For the full year ending 2012, the average estimate for revenue is $97.6 billion. The average EPS estimate is $3.85. (There are 24 revenue estimates and 23 EPS estimates.)

Investor sentiment
The stock has a five-star rating out of five at Motley Fool CAPS, with 4,183 members out of 4,338 rating the stock outperform and 155 members rating it underperform. Among 1,226 CAPS All-Star picks, 1,197 give Costco a green thumbs-up, and 29 give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Costco is outperform, with an average price target of $82.90.

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Seth Jayson had no position in any company mentioned here at the time of publication. You can view his stock holdings here. He is co-advisor of Motley Fool Hidden Gems, which provides new small-cap ideas every month, backed by a real-money portfolio. The Motley Fool owns shares of Costco Wholesale. Motley Fool newsletter services have recommended buying shares of Costco Wholesale. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Comments from our Foolish Readers

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Report this Comment On December 19, 2011, at 1:04 PM, DoctorLewis4 wrote:

Don't forget to factor in the dues. Costco's margin's have always been thin. They will tighten their margins to help their customers in tough times. What you are buying if you are long COST is income and growth. They are just getting started in Asia. It will be huge going forward. COST is the classic buy and hold.