We expect Costco Wholesale Corporation (COST) to beat expectations when it reports fourth-quarter fiscal 2014 results on Oct 8. Last quarter, the company posted a negative surprise of 1.8%.
Why a Likely Positive Surprise?
Our proven model shows that Costco is likely to beat earnings estimate this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 or 2 or 3 for this to happen. Costco has the right combination of the two key components.
Zacks ESP: Costco currently has an Earnings ESP of +0.66%. This is because the Most Accurate estimate stands at $1.53, while the Zacks Consensus Estimate is pegged at $1.52.
Zacks Rank: Costco carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank of #1, #2 and #3 have a significantly higher chance of beating earnings estimates. The Sell-rated stocks (Rank #4 and 5) should never be considered going into an earnings announcement.
What is Driving the Better-than-Expected Earnings?
Costco’s strategy of selling products at heavily discounted prices, consistent comparable-store sales growth and healthy membership renewal rate are the factors driving better-than-expected results. We believe that Costco continues to be a dominant retail wholesaler based on the breadth and quality of merchandise offered.
Other Stocks that Warrant a Look
Here are some other companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Abercrombie & Fitch Co. (ANF) has an Earnings ESP of +5.63% and a Zacks Rank #2 (Buy).
Chipotle Mexican Grill, Inc. (CMG) has an Earnings ESP of +1.30% and a Zacks Rank #2.
The Home Depot, Inc. (HD) has an Earnings ESP of +0.89% and a Zacks Rank #2.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment