Conspicuous consumption cathedral and hoary Motley Fool Stock Advisor recommendation Costco (NASDAQ:COST) reports its first fiscal quarter 2007 numbers Thursday morning. Want to know what Wall Street expects to see? Read on. Want to know what really matters? Read on a bit more.

What analysts say:

  • Buy, sell, or waffle? Twenty-five analysts follow Costco, which garners a half-dozen buy ratings, 16 holds, and three sells.
  • Revenues. On average, the analysts expect a 9% rise in revenue to $14.1 billion.
  • Earnings. Profits are predicted to rise 11% to $0.50 per share.

What management says:
Costco's fiscal fourth-quarter and full-year 2006 earnings report, released back in October, gave investors a very pleasant surprise indeed, coming as it did just six weeks after the firm had issued an earnings warning. Said CFO Richard Galanti, "Several factors enabled earnings results to be better than we anticipated six weeks ago .: recognition of income tax benefits . stronger-than-planned operating results in the final 5-week period of the fiscal quarter; improved gasoline profitability in the final week of the quarter; and lower than expected costs related to workers' compensation and other expense accruals."

What management does:
That said, Costco's razor-thin margins continue to inch downwards (as shown below), with gross margins taking most of the blame. Not that there's a lot of blame, or a lot of inching going on. In fact, you'd be hard-pressed to find another firm that turns in such consistent margins.

Margins %

5/05

8/05

11/05

2/06

5/06

9/06

Gross

12.6

12.5

12.4

12.4

12.3

12.3

Op.

3.0

3.0

2.8

2.8

2.9

2.9

Net

2.0

2.0

2.0

1.9

1.9

1.8

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
While I'd love to tell you what Motley Fool Stock Advisor co-analyst Tom Gardner thinks about Costco and its prospects right now, Fool disclosure rules prevent my revealing the contents of Tom's recently released six-month update on the company. (I can, however, point you toward a free trial to the newsletter, in which you can read Tom's comments for, well, free.)

I'm also permitted to reveal some more dated commentary that Tom prepared on Costco back in September. In the wake of the firm's (soon-to-be-belied) earnings warning, Tom opined that because Costco is so big, and its fortunes so tied to the success of the economy at large, he didn't find it at all surprising that sales of "big-ticket items such as jewelry, furniture, and flat-screen televisions" were slowing down back in the summer. (If you substitute the word "high-margin" for "big-ticket," by the way, I think you'll also see one reason why gross margins have compressed ever so slightly.)

That said, based on the firm's strong leadership and balance sheet, and its aggressive expansion plans, Tom remains quite upbeat about the company, pronouncing himself "confident in the company's prospects for the long term."

Competitors:

  • BJ's (NYSE:BJ)
  • Best Buy (NYSE:BBY)
  • Target (NYSE:TGT)
  • Wal-Mart (NYSE:WMT)

For additional Foolishness on Costco, read our recent bull/bear brawl:

Best Buy and Costco are Motley Fool Stock Advisor selections. Wal-Mart is a Motley Fool Inside Value recommendation. Check out our entire suite of newsletters by clicking here .

Fool contributor Rich Smith does not own shares of any company named above. The Fool has a disclosure policy.