Costco (COST, $467.75) beat fiscal Q4 expectations; will limit purchases owing to supply chain issues
Costco reported its fiscal fourth quarter earnings that surpassed analysts’ expectations. However, the big-box retail giant said that it would begin limiting purchases of certain essential items amid supply chain challenges.
Costco's earning in the quarter came in at $3.76 per share, up +23.7% year-over-year, and beating analysts’ expectations of $3.58 per share. Gross margins, however, fell -32 basis points to 10.9% owing to rising supply chain costs amid COVID-19 pandemic.
Revenue rose +17% from the year-ago quarter to $62.68 billion, compared to analysts’ estimates of $61.4 billion.
Comparable sales rose by a higher-than-expected +9.4%. Membership fees increased +11.7% to $1.234 billion, and total members topped 61.7 million.
During the earnings call, Costco Chief Financial Officer Richard Galanti said the retailer is “putting some [purchase] limitations on key items.” The items include toilet paper, paper towels, bottled water and high-demand cleaning products. But Galanti did not specify how many of each item customers will be allowed to purchase. The limitations are being placed due to shipping delays and truck driver shortages.
Galanti mentioned that the company has chartered three ocean vessels for the next year to transport containers between Asia and the U.S. and Canada. Each ship has the capacity to carry 800 to 1,000 containers at a time, he said.
COST sees its Stochastic Oscillator recovers from oversold territory
On May 26, 2023, the Stochastic Oscillator for COST moved out of oversold territory and this could be a bullish sign for the stock. Traders may want to buy the stock or buy call options. Tickeron's A.I.dvisor looked at 45 instances where the indicator left the oversold zone. In of the 45 cases the stock moved higher in the following days. This puts the odds of a move higher at over .
Technical Analysis (Indicators)
Bullish Trend Analysis
The Momentum Indicator moved above the 0 level on May 26, 2023. You may want to consider a long position or call options on COST as a result. In of 86 past instances where the momentum indicator moved above 0, the stock continued to climb. The odds of a continued upward trend are .
COST moved above its 50-day moving average on May 26, 2023 date and that indicates a change from a downward trend to an upward trend.
The 50-day moving average for COST moved above the 200-day moving average on May 26, 2023. This could be a long-term bullish signal for the stock as the stock shifts to an upward trend.
Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where COST advanced for three days, in of 386 cases, the price rose further within the following month. The odds of a continued upward trend are .
COST may jump back above the lower band and head toward the middle band. Traders may consider buying the stock or exploring call options.
Bearish Trend Analysis
The Moving Average Convergence Divergence Histogram (MACD) for COST turned negative on May 16, 2023. This could be a sign that the stock is set to turn lower in the coming weeks. Traders may want to sell the stock or buy put options. Tickeron's A.I.dvisor looked at 43 similar instances when the indicator turned negative. In of the 43 cases the stock turned lower in the days that followed. This puts the odds of success at .
The 10-day moving average for COST crossed bearishly below the 50-day moving average on May 25, 2023. This indicates that the trend has shifted lower and could be considered a sell signal. In of 13 past instances when the 10-day crossed below the 50-day, the stock continued to move higher over the following month. The odds of a continued downward trend are .
Following a 3-day decline, the stock is projected to fall further. Considering past instances where COST declined for three days, the price rose further in of 62 cases within the following month. The odds of a continued downward trend are .
The Aroon Indicator for COST entered a downward trend on May 26, 2023. This could indicate a strong downward move is ahead for the stock. Traders may want to consider selling the stock or buying put options.
Fundamental Analysis (Ratings)
The Tickeron Profit vs. Risk Rating rating for this company is (best 1 - 100 worst), indicating low risk on high returns. The average Profit vs. Risk Rating rating for the industry is 59, placing this stock better than average.
The Tickeron SMR rating for this company is (best 1 - 100 worst), indicating strong sales and a profitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The weighted SMR value is a proprietary formula developed by Tickeron and represents an overall profitability measure for a stock.
The Tickeron Price Growth Rating for this company is (best 1 - 100 worst), indicating steady price growth. COST’s price grows at a higher rate over the last 12 months as compared to S&P 500 index constituents.
The Tickeron PE Growth Rating for this company is (best 1 - 100 worst), pointing to average earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents.
The Tickeron Valuation Rating of (best 1 - 100 worst) indicates that the company is significantly overvalued in the industry. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. This rating is based on the following metrics, as compared to industry averages: P/B Ratio (9.862) is normal, around the industry mean (56.852). COST has a moderately high P/E Ratio (37.313) as compared to the industry average of (22.789). COST's Projected Growth (PEG Ratio) (3.478) is slightly higher than the industry average of (1.952). Dividend Yield (0.007) settles around the average of (0.034) among similar stocks. P/S Ratio (0.962) is also within normal values, averaging (1.153).
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