Core Viewpoint - Investors are increasingly seeking growth stocks that demonstrate above-average growth potential, with Costco identified as a strong candidate due to its favorable growth metrics and Zacks Rank [1][2]. Group 1: Earnings Growth - Costco has a historical EPS growth rate of 16.2%, with projected EPS growth of 11.8% for the current year, surpassing the industry average of 11.1% [4]. - Earnings growth is a critical factor for growth investors, as double-digit growth is often seen as indicative of strong future prospects [3]. Group 2: Asset Utilization - Costco's asset utilization ratio (sales-to-total-assets ratio) stands at 3.73, indicating that the company generates $3.73 in sales for every dollar in assets, significantly higher than the industry average of 1.46 [5]. Group 3: Sales Growth - The company's sales are projected to grow by 7.2% this year, compared to the industry average of 3.7%, highlighting Costco's strong sales growth potential [6]. Group 4: Earnings Estimate Revisions - The current-year earnings estimates for Costco have been revised upward, with the Zacks Consensus Estimate increasing by 0.2% over the past month, indicating positive momentum [8][9]. Group 5: Overall Assessment - Costco has achieved a Zacks Rank of 2 (Buy) and a Growth Score of A, positioning it as a potential outperformer and a solid choice for growth investors [9][10].

Core Insights - The Motley Fool aims to enhance the financial literacy and well-being of individuals by providing various financial services and educational resources [1] Company Overview - Founded in 1993, The Motley Fool is a financial services company focused on making the world smarter, happier, and richer [1] - The company reaches millions of people monthly through premium investing solutions, free guidance, market analysis, personal finance education, top-rated podcasts, and its non-profit foundation [1]

Core Insights - High-risk, high-reward stocks attract attention, but blue-chip companies are essential for a balanced portfolio [1][2][3] - Long-term stock gains and consistent growth are often associated with companies that have substantial market capitalization [1][4] - Blue-chip companies like Walmart, Costco, and Home Depot demonstrate financial resilience and a history of robust returns [1][4][5] Company Summaries Walmart - Walmart is enhancing its market presence through strategic e-commerce initiatives, including acquisitions and improvements in delivery and payment systems [9] - The company's market capitalization is $761.2 billion, with a trailing four-quarter earnings surprise of 9.3% on average [10] - The Zacks Consensus Estimate for Walmart's current financial-year sales and EPS indicates growth of 4.8% and 11.7%, respectively, from the previous year [11] Costco - Costco effectively navigates market fluctuations through strategic investments and a strong focus on memberships, leading to high renewal rates and customer loyalty [12] - The company's market capitalization is $417.1 billion, with a trailing four-quarter earnings surprise of 2% on average [12] - The Zacks Consensus Estimate for Costco's current financial-year sales and EPS suggests growth of 7.2% and 11.8%, respectively, from the prior year [12] Home Depot - Home Depot dominates the home improvement retail sector, leveraging digital innovations and a robust product lineup to drive growth [15] - The company's market capitalization is $411.7 billion, with a trailing four-quarter earnings surprise of 2.3% on average [16] - The Zacks Consensus Estimate for Home Depot's current financial-year sales forecasts growth of 3.9% from the previous year [16]

Core Insights - Costco's stock has increased approximately 35% over the past year and has tripled in value over the last five years, indicating strong investor confidence and performance [1] Group 1: Business Performance - Costco reported a year-over-year revenue growth of 7.5% in its fiscal Q1 2025, with profits rising by 13.2% [2] - The company had 77.4 million paid members at the end of fiscal Q1, reflecting a 7.6% increase from the previous year, and a membership renewal rate of 90.4%, with 92.8% in the U.S. and Canada [3] - Costco operated 896 warehouses at the end of Q1 and plans to increase this number to 916 during fiscal year 2025 [4] - E-commerce sales grew by 13% year-over-year in fiscal Q1, with a significant acceleration in December, where net sales increased by 8% and e-commerce sales surged by 34.4% [4][5] Group 2: Analyst Predictions - Analysts predict a consensus 12-month price target for Costco with an upside potential of around 8%, which is lower than the returns seen in the past two years [6][7] - The average revenue estimate for fiscal 2025 is projected at 7.14%, following a 5% increase in fiscal 2024 [8] - Earnings per share (EPS) for fiscal 2025 is expected to increase by 9.7%, following a 17% rise in fiscal 2024 [9] Group 3: Strategic Initiatives - Costco's e-commerce strategy and partnerships with Instacart and Uber Technologies are yielding positive results, and private-label product sales are growing faster than the overall business [10] - The company is capitalizing on disruptions in the retail pharmacy market, presenting new opportunities for growth [10] Group 4: Challenges and Considerations - Potential challenges include port strikes in Canada, the Eastern U.S., and India, which could impact operations, although Costco has strategies to mitigate these risks [11] - Concerns about valuation exist, as Costco's price-to-earnings ratio is near its highest level ever, suggesting a possible stock pullback in the future [12]

Core Viewpoint - Investing in stocks with high valuations can be strategic but requires caution, especially with the current market's average P/E ratio at approximately 30.6 [1] Group 1: Eli Lilly - Eli Lilly is recognized for its successful drugs, Zepbound and Mounjaro, but has a high P/E ratio of 79, indicating potential overvaluation [3] - The company's operating income has increased by 71% over the last three years, reaching $15.1 billion [4] - Recent guidance indicates a revenue shortfall of about $400 million for Q4 2024, attributed to weaker sales growth of its key drugs [5] - If growth does not accelerate as expected, the stock may be deemed too expensive [6] Group 2: Costco Wholesale - Costco has a P/E ratio of 55.7 and has seen a 234% increase in net income over the last decade, reaching $7.6 billion [7] - The company is under new leadership with CEO Ron Vachris, whose performance will be closely monitored [8] - Potential employee strikes could threaten Costco's traditional advantages of employee loyalty and efficiency, impacting the investment thesis [9][10] Group 3: Nvidia - Nvidia, with a P/E ratio of 54.6, is viewed as a market bellwether and is heavily involved in AI hardware production [11] - The company's operating income has surged by approximately 2,400% over the past five years, exceeding $71 billion [12] - High market expectations could lead to a significant drop in Nvidia's stock if growth slows, potentially affecting the broader market [13][14]

Core Viewpoint - Costco is opposing a shareholder proposal that calls for an evaluation of business risks associated with its diversity, equity, and inclusion (DEI) practices, with a vote expected during the company's annual meeting [1][3]. Group 1: Proposal Details - The National Center for Public Policy Research submitted the proposal, claiming that Costco's DEI initiatives pose "litigation, reputational and financial risks to the company, and therefore financial risks to shareholders" [2][6]. - The proposal is part of a broader trend where conservative groups are challenging corporate DEI initiatives, especially following a U.S. Supreme Court decision that outlawed affirmative action in college admissions [2][8]. Group 2: Company Response - Costco's board of directors unanimously voted to recommend that shareholders reject the proposal, asserting that their commitment to respect and inclusion is essential and that the requested report would not yield meaningful information [3][10]. - The board emphasized that diverse employees and suppliers contribute to creativity, innovation, and customer satisfaction [3]. Group 3: Market Context - Analysts believe that Costco's management is generally trusted, and there is a prevailing sentiment among shareholders to maintain the current course without disruption [4]. - Other major companies, such as Walmart and McDonald's, have recently faced shareholder scrutiny regarding their DEI policies, indicating a shifting landscape in corporate diversity initiatives [7][9]. Group 4: Legal and Social Implications - The proposal highlights concerns that a significant portion of Costco's workforce, approximately 200,000 out of 300,000 employees, could be seen as victims of illegal discrimination due to the company's DEI practices [10][11]. - The current political climate, including actions taken by former President Trump to terminate DEI programs within federal agencies, adds complexity to the corporate landscape regarding diversity initiatives [9][15].

Group 1: Eli Lilly and Co. (LLY) - Eli Lilly's shares have outperformed the Zacks Large Cap Pharmaceuticals industry over the past year, with a growth of 18.2% compared to a decline of 1.7% in the industry [4] - The demand for Eli Lilly's GLP-1 drugs, Mounjaro and Zepbound, remains strong, contributing significantly to top-line growth in 2024 [4] - However, sales of Mounjaro and Zepbound were disappointing in the second half of 2024, raising concerns about moderating demand [5] - Declining sales of Trulicity and rising pricing pressure on some drugs are notable headwinds for the company [5] Group 2: Exxon Mobil Corp. (XOM) - Exxon Mobil's shares have outperformed the Zacks Oil and Gas - Integrated - International industry over the past year, with a growth of 19.6% compared to 14.5% in the industry [6] - The company's high-value assets in the Permian Basin and Guyana have driven robust production growth, doubling upstream earnings since 2019 [6] - Refining margins are pressured due to global capacity increases, leading to softening refining profits [8] - Commodity price volatility poses challenges to profitability, especially with crude prices dipping in the third quarter [8] Group 3: Costco Wholesale Corp. (COST) - Costco's shares have outperformed the Zacks Retail - Discount Stores industry over the past year, with a growth of 43.3% compared to 23.6% in the industry [9] - The company is expected to register an 11.5% adjusted earnings per share improvement in fiscal 2025, driven by 6.6% revenue growth [10] - Key strengths include strategic investments, a customer-centric approach, and a focus on membership growth [9][10] - Costco's favorable product mix and strong liquidity position are expected to help it continue outperforming [11] Group 4: Flanigan's Enterprises, Inc. (BDL) - Flanigan's shares have underperformed the Zacks Retail - Restaurants industry over the past year, with a decline of 3.1% compared to a growth of 6.3% in the industry [12] - The company faced a 16.1% net income decline and inflation-driven margin pressure [12] - Despite challenges, Flanigan's achieved 7.9% revenue growth to $188.3 million in fiscal 2024, driven by a rise in restaurant and package store sales [13] - Geographic expansion opportunities and operational efficiencies position the company for long-term growth [14]

Labor Dispute and Union Actions - Over 18,000 Costco employees, represented by the Teamsters, have voted to strike on January 31 due to unresolved labor disputes [1] - The Teamsters and Costco have been in negotiations since mid-December, but 85% of union members voted for a strike after the company rejected proposals for increased seniority pay, paid family leave, bereavement policies, sick time, and safeguards against surveillance [2] - The strike will impact approximately 50 of Costco's 624 U.S. stores, primarily in California, New York, New Jersey, Virginia, and Washington [3] - The Teamsters allege that Costco has expelled union representatives from stores, harassed workers for wearing union buttons, and blocked union updates on in-store bulletin boards during negotiations [4] Financial Performance and Union Demands - Since the Teamsters' current contract in 2022, Costco's revenues have increased by 12%, from $222.7 billion to $249.6 billion, and profits have grown by 26%, reaching $7.4 billion from $5.8 billion [5] - The Teamsters argue that Costco should recognize the contributions of its union members to the company's financial success rather than prioritizing Wall Street shareholders [5] Employee Sentiment and Corporate Culture - Christopher Reed, a Costco employee and Teamster member, expressed dissatisfaction with the company's corporate culture, stating that management has become disconnected and dismissive, prioritizing shareholders over workers [6] - Costco's former CEO Craig Jelinek and current CEO Ron Vachris acknowledged a failure in leadership after workers in Norfolk, VA voted to join the Teamsters, stating they were "disappointed in ourselves as managers and leaders" [9] Compensation and Reputation - Costco is known for its industry-leading pay and benefits, with an average hourly pay rate of about $31 last year, translating to approximately $64,000 annually for full-time employees [8] - Entry-level jobs at Costco start at $19.50 per hour [8] Shareholder Proposal on DEI Policies - Costco faces a shareholder proxy vote regarding its diversity, equity, and inclusion (DEI) policies, with the board unanimously rejecting the proposal and urging shareholders to do the same [7] - The board stated that its DEI efforts help attract and retain employees who contribute to the company's success [8]

Company Overview - Costco is recognized for its exceptional return on assets (ROA) and return on equity (ROE), outperforming other discount stores and grocery chains as of January 2025 [5] - The company's earnings are primarily driven by its membership program, which generates significant revenue despite a slim profit margin on goods sold [6][10] Business Model - Unlike many discount retailers, Costco prioritizes employee welfare by offering living wages and comprehensive health benefits, leading to higher employee satisfaction and better customer service [7][9] - The Kirkland store brand is noted for its quality, often matching or exceeding leading brands, which contributes to customer loyalty [8] Financial Performance - In fiscal year 2024, Costco reported a net income of $7.4 billion, with $4.8 billion coming from membership fees, representing approximately 65% of total earnings [10] - The stock has experienced a compound average growth rate (CAGR) of 27% over the last five years, surpassing competitors like Walmart and Amazon [11][12] Investment Considerations - While Costco is a strong candidate for a long-term investment portfolio, current stock valuations may be high, requiring investors to be comfortable with premium pricing [12][13] - The timing for purchasing Costco shares may not be optimal at present, suggesting that investors consider other opportunities for wealth accumulation [14]

Core Viewpoint - The article discusses the investment position of Parkev Tatevosian, CFA, and mentions the involvement of The Motley Fool with Costco Wholesale, highlighting potential conflicts of interest in investment recommendations [1] Group 1 - Parkev Tatevosian has no position in any of the stocks mentioned [1] - The Motley Fool has positions in and recommends Costco Wholesale [1] - Parkev Tatevosian is an affiliate of The Motley Fool and may be compensated for promoting its services [1]