TLDR
- Costco’s March net sales hit $28.41B, up 11.3% year-over-year, beating analyst expectations
- Gas prices jumping 17.8% helped drive traffic and boosted ancillary business growth into the mid-20% range
- Truist called results “solid” but kept its Hold rating, citing a valuation of ~48x earnings
- Truist maintained its $977 price target, implying about 5% downside from current levels
- Wall Street consensus sits at Moderate Buy (15 Buys, 6 Holds, 1 Sell), with an average target of $1,090.50
Costco posted March net sales of $28.41 billion for the five-week period ending April 5. That’s an 11.3% jump from $25.51 billion in the same period last year.
Costco Wholesale Corporation, COST
Total comparable sales — covering warehouses and e-commerce active for at least a year — grew 9.4% year-over-year. That came in well ahead of what analysts were penciling in.
Before the report, Telsey analyst Joseph Feldman had forecast total sales growth of around 7.7%, boosted by higher gas prices and a weaker dollar. Costco cleared that bar with room to spare.
Gas was a real tailwind here. Pump prices rose 17.8% during the period, pulling more customers into Costco’s stations for cheaper fuel. That traffic spill carried over into the core business.
Truist’s five-star analyst Scot Ciccarelli noted that the gas boost helped drive mid-to-high single-digit growth in Costco’s fresh food and non-food categories.
Ancillary Business Surges
Costco’s ancillary operations — gas, pharmacy, eye care, and food court — posted growth in the mid-20% range during the period. That’s a strong number for what’s often considered the company’s secondary revenue stream.
Ciccarelli summed it up simply: “Overall, the business remains strong as the company caters its extreme value proposition to an increasingly value-driven consumer base.”
Despite the upbeat tone, Truist kept its Hold rating on COST. Ciccarelli sees the upside and downside as roughly equal from here, given a valuation sitting around 48 times annual EPS.
He also held his price target at $977 — about 5% below where the stock is currently trading.
Valuation Still the Sticking Point
This isn’t the first time valuation has come up as a concern. COST is up around 20% year-to-date, and that run has made some analysts cautious about the entry point.
Costco’s P/E sits at 53.6. For context, its most recent quarterly EPS came in at $4.58, beating estimates of $4.55. Revenue for that quarter was $69.6 billion, up 9.2% year-over-year.
The broader Wall Street picture is more constructive. Of 22 analysts covering the stock, 15 rate it a Buy, six have it at Hold, and one says Sell. The average price target is $1,090.50, implying around 6% upside from current levels.
BMO Capital Markets has the most bullish target on the Street at $1,315. UBS and Robert W. Baird sit at $1,175 and $1,100 respectively.
Meanwhile, Costco continues to move on several operational fronts. It’s testing a checkout system that could process transactions in under 10 seconds. It’s also trialing Kirkland Signature energy drinks that mimic Celsius flavors at lower prices.
A first standalone Costco gas station is also in development, and new club openings — including a New Braunfels location this spring — continue to add membership revenue.
The stock carries a quarterly dividend of $1.30 per share, an annualized yield of 0.5%.
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