Core Viewpoint - Costco Wholesale is set to report its fiscal second-quarter results, with expectations for continued growth despite a challenging market environment [1][2]. Financial Performance Expectations - Analysts predict an 8% revenue increase, reaching $63 billion for the 12-week period ending mid-February, with a modest profit forecast of $4.10 per share, reflecting less than a 5% year-over-year increase [4]. - Costco's total sales rose by 9.2% in December and 9.9% in January, with domestic comparable sales remaining above 9% [5]. - Analyst estimates for quarterly profit have gradually increased from $4.01 to $4.10 over the past three months, indicating positive sentiment [5]. Membership Fee Adjustments - Costco recently increased its membership fees, with the Gold Star plan rising from $60 to $65 and the Executive tier from $120 to $130, marking the smallest percentage increase since 1983 [6]. - Membership fees contribute approximately 2% of total sales but are crucial for profitability, translating into a significant portion of the bottom line [7]. Historical Context and Leadership - Costco has maintained positive top-line growth for over three decades, with only one year of decline during the Great Recession [9][10]. - CEO Ron Vachris, a long-time employee, has ensured continuity in leadership and operational strategy [10]. Market Position and Valuation - Costco's stock is currently valued at 57 times this fiscal year's net income projection, indicating a premium valuation compared to fundamentals [9]. - Historical performance suggests that betting against Costco has not been successful, reinforcing confidence in its market position [11].

Core Insights - Costco's dividend has consistently increased since its introduction in 2004, with a recent special dividend of $15 per share in January 2024 [1] - The current dividend payout is $4.64 per share, supported by strong free cash flow of approximately $2.2 billion in Q1 fiscal 2025 [3] - Despite the consistent dividend growth, the yield is only 0.4%, significantly lower than the S&P 500 average of 1.25% [4] Dividend Analysis - Costco's dividend yield is low compared to competitors, with Walmart at 0.9% and Target at 3.5% [5] - In 2024, shareholders received $19.50 per share in total dividend income, but the yield remains below 1.9% when considering the current share price [4] - The company has a history of increasing dividends, having raised its payout for 21 consecutive years [10] Stock Performance - Costco's stock price increased over 40% last year, outperforming the S&P 500 [6] - The company operates 890 warehouses globally, with plans to open 29 more in fiscal 2025 and a renewal rate of 91% [7] - Fiscal 2024 net income reached $7.4 billion, a 17% increase year-over-year, with profits rising 13% in Q1 fiscal 2025 [8] Valuation Concerns - The current P/E ratio is at an all-time high of 62, raising concerns about valuation sustainability [8][12] - Analysts forecast only 13% annual profit growth for fiscal 2025, which may not justify the high earnings multiple [9] - The low dividend yield and high valuation suggest that investors may find better returns in other retail stocks [12]

Core Viewpoint - The consumer staples sector is demonstrating resilience amid a broader market downturn, outperforming the S&P 500 and breaking through previous resistance levels [1][2]. Group 1: Market Performance - The S&P 500 ETF has declined nearly 3% in a week, with most sectors following this downward trend due to rising economic uncertainty [1]. - The Consumer Staples Select Sector SPDR Fund (XLP) has outperformed the broader market, showcasing its defensive nature during turbulent times [2][3]. Group 2: Sector Characteristics - Consumer staples include essential goods such as food, beverages, household items, and personal care products, which maintain steady demand regardless of economic conditions [2]. - This sector is considered a "defensive" investment, providing consistent revenue and earnings, especially when growth stocks falter [3][4]. Group 3: Investment Opportunities - The XLP ETF offers diversified exposure to the consumer staples sector with a low expense ratio of 0.09% and a dividend yield of 2.2%, making it a cost-effective choice for long-term investors [6]. - Costco Wholesale, as XLP's largest holding, has seen its stock rise over 43% in the past year, with a projected EPS of $4.09 for its upcoming earnings report [8][9]. - Philip Morris International has surged 72% over the past year, with a robust dividend yield of 3.43% and strong earnings guidance for 2025, driven by a significant increase in oral product shipments [10][11].

Group 1 - Costco is opening nine new warehouse stores globally this year, with six in the U.S. set to open in March 2025 [1] - New store locations in the U.S. include Brentwood, Highland, Prosper, Weatherford, Genesee County, and Sharon, with additional openings in Stuart, Florida, and Minami Alps, Japan [1] - The company plans to open a Costco in Ardeer, Australia later this year, although no specific date has been provided [3] Group 2 - Costco's CEO announced a projection of 29 openings during fiscal year '25, including 26 net new buildings, with 10 warehouses outside the U.S. [5] - The retailer reported net sales of $19.51 billion for January, reflecting a 9.2% increase from the previous year [5] - Currently, Costco operates 897 warehouses worldwide, with growth opportunities identified in Canada, Mexico, Europe, and Asia [6]

Group 1 - The momentum trade has shifted from large-cap technology and AI-focused companies to unexpected players such as Walmart and Costco, along with some major banks [1] Group 2 - The article emphasizes the importance of thematic investing and market events, highlighting the need for financial narratives that resonate with everyday investors [1] - It discusses the role of macro drivers in various asset classes, including stocks, bonds, commodities, currencies, and cryptocurrencies [1] - The use of empirical data and charts is noted as a method to effectively communicate financial information [1]

Core Viewpoint - Costco's stock experienced a decline of 2.6% due to negative news from rival Walmart, despite Costco's usual strong performance in the market [1]. Group 1: Company Performance - Walmart reported its fourth-quarter and full-year fiscal 2025 financial results, showing decent year-over-year growth in revenue, but a decline in net income [2]. - Walmart's profitability guidance for fiscal 2026 fell short of analyst expectations, impacting market sentiment towards Costco as well [2]. Group 2: Market Dynamics - Costco operates on a membership model, contrasting with Walmart's open supermarket format, yet both companies are affected by the same retail environment [3]. - Concerns about one retailer can lead to market reactions that impact others in the same sector, as seen with Costco's stock movement following Walmart's results [3]. Group 3: Investor Sentiment - Despite the negative impact from Walmart's results, there are positive indicators in Walmart's performance, such as a 16% year-over-year growth in international e-commerce and overall revenue growth exceeding 4% [4]. - The overall sentiment remains bullish on large retail companies, including both Costco and Walmart [4].

Core Viewpoint - Growth investors are focused on stocks with above-average financial growth, but identifying such stocks can be challenging due to associated risks and volatility [1] Group 1: Growth Stock Identification - The Zacks Growth Style Score simplifies the process of finding promising growth stocks by analyzing a company's real growth prospects beyond traditional metrics [2] - Costco (COST) is highlighted as a recommended stock with a favorable Growth Score and a top Zacks Rank [2] Group 2: Earnings Growth - Earnings growth is a critical factor for growth investors, with double-digit growth being particularly attractive [4] - Costco's historical EPS growth rate is 16.2%, with a projected EPS growth of 11.9% this year, surpassing the industry average of 10.7% [5] Group 3: Asset Utilization - The asset utilization ratio, or sales-to-total-assets (S/TA) ratio, is an important indicator of efficiency in growth investing [6] - Costco's S/TA ratio is 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 [6] Group 4: Sales Growth - Sales growth is another key factor, with Costco expected to achieve a sales growth of 7.4% this year, compared to the industry average of 5.5% [7] Group 5: Earnings Estimate Revisions - Positive trends in earnings estimate revisions are correlated with stock price movements [8] - Costco has seen upward revisions in current-year earnings estimates, with a 0.1% increase in the Zacks Consensus Estimate over the past month [8] Group 6: Overall Positioning - Costco has earned a Growth Score of A and carries a Zacks Rank 2 due to positive earnings estimate revisions, positioning it well for outperformance [10]

Group 1: Momentum Investing Overview - Momentum investing involves following a stock's recent trend, with the aim of buying high and selling higher, capitalizing on established price movements [1] - The Zacks Momentum Style Score helps define momentum characteristics, with Costco (COST) currently holding a Momentum Style Score of B [2] - Style Scores complement the Zacks Rank system, which has a strong track record of outperforming the market; Costco has a Zacks Rank of 2 (Buy) [3] Group 2: Costco's Performance Metrics - Costco shares have increased by 6.52% over the past week, while the Zacks Retail - Discount Stores industry has decreased by 0.94% during the same period [5] - Over the past quarter, Costco shares have risen by 14.77%, and they are up 47.49% over the last year, significantly outperforming the S&P 500's gains of 1.43% and 21.95%, respectively [6] - The average 20-day trading volume for Costco is 1,876,515 shares, indicating a bullish sign when combined with rising stock prices [7] Group 3: Earnings Outlook - In the past two months, 6 earnings estimates for Costco have been revised upwards, while none have been revised downwards, increasing the consensus estimate from $17.91 to $18.03 [9] - For the next fiscal year, 7 estimates have moved upwards, with only 1 downward revision, indicating positive earnings momentum [9] Group 4: Conclusion - Given the positive performance metrics and earnings outlook, Costco is positioned as a 2 (Buy) stock with a Momentum Score of B, making it a strong candidate for near-term investment [11]

Core Insights - Costco's January sales results indicate strong performance, with comparable sales growth and increased net sales, which may influence the stock's future trajectory [1][3][10] Sales Performance - For the four weeks ended February 2, 2025, comparable sales in the U.S. grew by 9.2%, while Canada and Other International markets saw increases of 5.7% and 1.1% respectively, leading to a total company comparable sales rise of 7.5% [3] - Net sales for January reached $19.51 billion, up from $17.87 billion in the same period last year, reflecting a 9.2% increase [3] Membership and Revenue Model - Costco's membership-driven model is crucial for growth, with high renewal rates exceeding 90% in key markets, ensuring a reliable revenue stream [2][4] - Paid household memberships rose by 7.6%, and Executive Memberships, which account for 73.1% of worldwide sales, increased by 9.2% during the first quarter of fiscal 2025 [5] Operational Efficiency - The company has demonstrated strong comparable sales growth through both physical and digital platforms, supported by disciplined cost control and product mix optimization [6][7] - Costco's operational efficiencies and strong balance sheet provide a solid foundation for future growth [7] Valuation and Market Position - Costco's stock has increased by 47% over the past year, outperforming the industry average of 24.2%, indicating strong investor confidence [8] - The company's forward 12-month price-to-earnings ratio is 56.57, significantly higher than the industry average of 33.40 and the S&P 500's ratio of 22.54, reflecting its premium valuation [9][10] Earnings Estimates - Analysts have revised earnings per share estimates upward, with current estimates for the fiscal year at $18.03 and $19.69 for the next fiscal year, indicating expected year-over-year growth rates of 11.9% and 9.2% respectively [11]

Group 1 - The stock market has seen significant gains since October 2022, with the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite increasing by 36%, 56%, and 79% respectively by February 7, 2025 [1] - Artificial intelligence (AI) is a major factor contributing to the stock market's outperformance, with a projected $15.7 trillion addressable market by the end of the decade [2] - Investor enthusiasm surrounding stock splits has also played a role in lifting stock valuations, alongside factors like declining inflation rates and political developments [3] Group 2 - A stock split allows a company to adjust its share price and outstanding share count without affecting its market capitalization or operating performance [4] - Forward stock splits are preferred by investors as they lower the nominal share price, making it easier for retail investors to purchase shares [6] - Companies that conduct forward splits tend to outperform the S&P 500 in the 12 months following the announcement, indicating their strong market position [7] Group 3 - In 2024, over a dozen companies completed stock splits, with only one being a reverse split, highlighting a trend towards forward splits [8] - Costco Wholesale is identified as a leading candidate for a stock split in 2025, with over 36% of its shares owned by retail investors and a high nominal share price of approximately $1,044 [12] - Costco's business model, which includes bulk purchasing and membership fees, contributes to its significant stock performance since its IPO, with a 62,500% gain [12][13] Group 4 - Costco's stock is currently trading at a high valuation of 57 times forecast earnings per share for 2025, which is more than double the S&P 500's consensus P/E ratio [14] - A stock split could help mitigate concerns about Costco's expensive valuation, potentially attracting more investors [15]