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PriceSmart Earnings: An Early Look

By Dan Caplinger - Apr 6, 2013 at 4:15PM

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Will the Latin American warehouse-club giant get earnings off on the right foot?

Spring is finally here, and a new earnings season is right around the corner. Next Tuesday, PriceSmart (PSMT 2.10%) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

PriceSmart isn't a name you'll see in the U.S., but the company has taken the warehouse-club model south of the border and turned it into a thriving business throughout Latin America and Caribbean. Can the company keep up its growth pace? Let's take an early look at what's been happening with PriceSmart over the past quarter and what we're likely to see in its quarterly report on Tuesday.

Stats on PriceSmart

Analyst EPS Estimate

$0.77

Change From Year-Ago EPS

15%

Revenue Estimate

$609.7 million

Change From Year-Ago Revenue

10.9%

Earnings Beats in Past 4 Quarters

2

Source: Yahoo! Finance.

Is PriceSmart's stock a good bargain?
Analysts have had mixed views on PriceSmart recently, reining in their estimates for the most recent quarter by a penny per share but boosting their full-year fiscal 2013 consensus by $0.03 per share. The stock has also had a tepid performance, with share prices up less than 3% since the beginning of 2013.

Given PriceSmart's business model, investors inevitably make comparisons with U.S. warehouse king Costco (COST 0.55%) and its hugely successful business model of reaping the bulk of its profit from membership fees. Right now, PriceSmart looks a lot like Costco did 25 years ago, with rapidly growing sales but plenty of untapped potential. For PriceSmart, that potential could come from southward expansion into key South American markets such as Brazil, as the company thus far has concentrated on the Caribbean and Central America for most of its stores.

Source: PriceSmart investor relations.

But competition may be coming for PriceSmart. Last month, Wal-Mart (WMT -0.61%) got environmental approval for a store in Costa Rica, directly challenging PriceSmart's home territory.

Still, for now, PriceSmart has kept itself growing at a strong pace. In February, the company reported an 8% increase in sales with a jump in same-store comps of almost 9%. With the announcement of a new club coming to Honduras next year, PriceSmart remains on a steady path to growing its presence throughout the region.

In its earnings report, watch for PriceSmart to discuss its longer-term plans for expansion. With the prospects that Brazil could bring the company, investors won't want PriceSmart to wait too long before making its move southward.

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Stocks Mentioned

PriceSmart, Inc. Stock Quote
PriceSmart, Inc.
PSMT
$76.90 (2.10%) $1.58
Wal-Mart Stores, Inc. Stock Quote
Wal-Mart Stores, Inc.
WMT
$123.37 (-0.61%) $0.76
Costco Wholesale Corporation Stock Quote
Costco Wholesale Corporation
COST
$440.11 (0.55%) $2.40

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