What The Buy Side Is Expecting From Costco Thursday

May.28.14 | About: Costco Wholesale (COST)

Summary

The past three reports have been weak from Costco with EPS growing 1% for two periods before the company posted a particularly poor quarter in March with earnings dropping 5%.

This quarter Wall Street is expecting Costco to pick up its pace of profit growth to 5% on a year-over-year basis.

Wall Street also expects a considerable sales increase of nearly 7% this quarter.

Costco Wholesale Corp. (NASDAQ:COST) is set to report FQ3 2014 earnings before the market opens on Thursday, May 29th. Costco is the largest members-only warehouse shopping club in the United States. This quarter Wall Street is expecting Costco to pick up its pace of profit growth to 5% on a year-over-year basis. The past three earnings reports have been weak from Costco with EPS growing 1% for two periods before the warehouse club posted a particularly poor quarter in March with earnings dropping 5% compared to the same period 1 year prior. Wall Street also expects a considerable sales increase of nearly 7% this quarter. Here's what investors are expecting 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.

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(Click here to see Estimates and Interactive Features for Costco)

The current Wall Street consensus expectation is for Costco to report $1.09 EPS and $25.685B revenue while the current Estimize.com consensus from 20 Buy Side and Independent contributing analysts is $1.09 EPS and $25.621B in revenue. This quarter the buy side as represented by the Estimize.com community is expecting Costco to report in-ine with Wall Street on EPS while missing sales estimates by $64 million.

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 more accurate than Wall Street up to 69.5% of the time.

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. Here we are seeing a smaller differential than usual between expectations from the two groups.

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The distribution of earnings estimates published by analysts on the Estimize.com platform range from $1.02 to $1.13 per share and from $25.300B to $25.906B in revenues. This quarter we're seeing a moderate range of estimates for Costco's earnings and a smaller range of estimates on revenue.

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 narrow range of estimates signals more agreement in the market, which could mean less volatility post earnings.

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Throughout the quarter the Wall Street EPS consensus fell from $1.14 to $1.09 while the Estimize consensus declined from $1.13 to $1.09. Meanwhile the Wall Street revenue consensus dropped before rising from a low of $25.641B to $25.685B while the Estimize consensus gradually decreased across the period from $25.839B to $25.621B. Timeliness is correlated with accuracy and the directionality of analyst revisions going into an earnings report are often a leading indicator. Here we see flat EPS expectations and a rising Wall Street consensus while the Estimize consensus has been faltering at the end of the quarter.

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The analyst with the highest estimate confidence rating this quarter is BradHewitt91 who projects $1.07 EPS and $25.470B in revenue. BradHewitt91 is ranked 12th overall among over 4,500 contributing analysts. This season BradHewitt91 has been more accurate than Wall Street in forecasting EPS and revenue an impressive 62% and 58% of the time, respectively, throughout 139 estimates.

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 BradHewitt91 is making a bearish call expecting Costco to miss the Estimize consensus on both EPS and revenue.

This quarter both the Estimize community and Wall Street are expecting a relatively strong period from Costco compared to the company's other recent earnings reports. However, contributing analysts on the Estimize.com platform only expect Costco to report in-line with Wall Street on EPS and come up $64 million shy on sales.

Disclosure: None.