Costco Inc. (NASDAQ:COST) is set to report FQ2 2014 earnings before the market opens Thursday, March 6th. Costco is the largest members only warehouse club in the United States and the 7th largest in the world. Costco's makes money both by selling discounted goods at large volume and by collecting yearly memberships fees which run a minimum of $55 per year. This year Costco is expected to add about 30 stores globally and Wall Street is expecting the company to grow revenue by 9% compared to FQ2 last year. Here's what investors expect from Costco on Thursday.
The information below is derived from data submitted to the Estimize.com platform by a set of Buy Side and Independent analyst contributors.
The current Wall Street consensus expectation is for COST to report $1.17 EPS and $26.621B revenue while the current Estimize.com consensus from Buy Side and Independent contributing analysts is $1.18 EPS and $26.764B in revenue. This quarter the buy-side as represented by the Estimize.com community is expecting Costco to beat the Wall Street consensus on both EPS and revenue.
By tapping into a wider range of contributors including hedge fund analysts, asset managers, independent research shops, students and non professional investors Estimize has created a data set that is up to 69.5% more accurate than Wall Street, but more importantly it does a better job of representing the market's actual expectations. It has been confirmed by an independent academic study from Rice University that stock prices tend to react with a more strongly associated degree to the expectation benchmark from Estimize than from the Wall Street consensus.
The magnitude of the difference between the Wall Street and Estimize consensus numbers often identifies opportunities to take advantage of expectations that may not have been priced into the market. In this case we are seeing a small differential between the two groups.
The distribution of estimates published by analysts on the Estimize.com platform range from $1.01 to $1.27 EPS and $26.129B to $27.627B in revenues. This quarter we're seeing a wide distribution of estimates for Costco, especially on EPS.
The size of the distribution of estimates relative to previous quarters often signals whether or not the market is confident that it has priced in the expected earnings already. A wider distribution of estimates signaling less agreement in the market could mean greater volatility post earnings.
Over the past four months the Wall Street EPS consensus has fallen from $1.19 to $1.17 while the Estimize consensus has increased from $1.13 to $1.18. Meanwhile the Wall Street revenue forecast fell from $26.892B to $26.621B. while the Estimize forecast pushed higher from $26.673B to $26.764B. Timeliness is correlated with accuracy and the directionality of analyst revisions going into a report can often be an indicator. In this case we saw divergent revenue expectations as the Wall Street consensus shrank while Estimize contributor revisions are giving a bullish signal.
The analyst with the highest estimate confidence rating this quarter is anmikyoso who projects $1.19 EPS and $26.811B in revenue. In the Winter 2014 season anmikyoso is rated as the 36th best analyst and is ranked 36th overall among over 3,950 contributing analysts. Estimate confidence ratings are calculated through algorithms developed by deep quantitative research which looks at correlations between analyst track records and tendencies as they relate to future accuracy. In this case anmikyoso is making a bullish call expecting Costco to beat the Estimize consensus on both EPS and revenue.
This quarter contributing analysts on the Estimize.com platform are expecting Costco to accelerate its rate of growth. Year-over-year revenue is expected to jump to nearly 10% compared to 6% last FQ2 and 5% in the previous quarter. Although the poor weather has kept sales low at most retailers this holiday season, Costco may benefit as it is an ideal place to visit to stock up on discount bulk supplies in anticipation of a snowstorm.