Janney Capital Maintains Neutral Following Costco Wholesale (COST) Q3
Janney Capital maintains a Neutral rating and $141 price target on Costco Wholesale (NASDAQ: COST) following Q3. COST reported EPS of $1.17 which is in-line with Janney estimates. Analyst David Strasser said that it was a strong quarter, despite headwinds.
Strasser commented, "COST’s Q3 EPS of $1.17 is in line with our est., and a penny above the Street. Gross margin up 47bps vs. our 20bps est., along with SG&A $ growth of 3.7% vs. our 7% est. helped Q3. This was offset by softer headline comp of -1%. The weaker headline comp is due to the negative impact of FX/gas as core comp trends remain best in class at +6% with the US comp of 5% and intl. comp of 7%. Similar to past quarters, we believe GM uptick is primarily due to higher gas profitability. This gas profitability will start to wane in a sequentially rising gas price environment as their gas COGS will be higher than local competitors due to their high daily volume purchases. SG&A was well managed, but deleveraged 25bps due to comp. We look for color on what drove slower SG&A spend, especially after 7.8% and 5.5% $ growth in the first two quarters. Overall, an impressive quarter in a tough environment."
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Shares of Costco Wholesale closed at $145.42 yesterday.