Reports the results of Q3 2021 on Thursday, May 27 after the close
Revenue Expectation: $ 43.64 Billion
EPS expectation: $ 2.31
For the past year, Costco Wholesale (NASDAQ 🙂 has been one of investors' favorite choices. The COVID-19 pandemic triggered an unprecedented surge in sales volumes for the international big-box retailer as consumers replenished their pantries to avoid too many trips to stores.
Costco Weekly Chart.
As the US moves closer to containing the pandemic and fully reopening the country's economy, Costco's biggest challenge is to make it through lockdowns to keep growth-hungry investors happy.
When the Washington-based retailer reports its final earnings tomorrow, the tough year-over-year comparisons could be the first hurdle as these results will be seen in contrast to sales starting in March last year, a time when the outlet benefited from pandemic-era stock building and increased home cooking.
Despite this great risk, many analysts believe that Costco will be able to maintain its gains in market share. According to them, Costco is a solid long-term defensive game with its extensive retail network and subscription-based retail model keeping its revenues stable.
With a substantial portion of its business focused on selling goods at low profit margins, the Warehouse Shopping Club has approximately 108 million members. In fiscal year 2020, they paid the company $ 3.541 billion in membership fees alone. In total, the retailer generated annual sales of more than $ 163 billion. loyal customer base and global growth opportunity. Oppenheimer analysts also support Costco for its long-term outlook, citing its unique and improving consumer value proposition and its open-ended global growth outlook.
Another reason to stick to Costco stock in the post-pandemic environment is the company's highly lucrative dividend policy. In November, the company announced a $ 4.4 billion special distribution. Per share, that works out to about $ 10 per share.
Costco offers a quarterly payout of $ 0.79 per share at a current yield of 0.84%, which is up 12.7% per year for the past five years. Stocks, which remained under pressure early in the year, are up 13% over the past three months, closing at $ 385.38 on Tuesday.
There is no doubt that some of the profits Costco made during the pandemic will likely diminish as consumers shift their spending to restaurants and travel. But other sources of income that had been held back should return, such as fuel and food court sales, leaving some leeway.
Bottom Line
Costco & # 39; s broad economic moat, massive physical empire – including stores in the US, Canada, Mexico, the British parts of continental Europe, Japan, South Korea, and even a small presence in China – and its solid membership program makes its shares attractive to long-term investors. Any weakness after earnings can provide long-term investors with a buying opportunity.
