Costco Earnings Preview | ORBITAL AFFAIRS

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The Impact of Costco’s Fiscal Third-Quarter Earnings Report

Key Takeaways

  • Costco Wholesale reports fiscal third-quarter earnings after the bell on Thursday, May 30.
  • Analysts expect Costco to report growing revenue and net income from the year-ago period, along with an uptick in memberships.
  • Uber recently announced that Uber Eats users can order Costco products through the app, whether they are Costco members or not.
  • This earnings report will be Costco’s first in decades with a new finance chief, as longtime CFO Richard Galanti stepped down in March.

Costco Wholesale (COST) is set to release its fiscal third-quarter earnings report after the closing bell on Thursday, May 30. This will mark the first earnings report for the warehouse retailer with a new chief financial officer (CFO) in decades, following the departure of longtime CFO Richard Galanti from the position in March.

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Analysts are anticipating a 7.9% year-over-year increase in revenue for Costco, with estimates pegging revenue at $57.89 billion compared to $53.65 billion in the third quarter of the previous year. Net income is also expected to see a significant jump of 25% to $1.63 billion from $1.3 billion.

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The previous quarter saw Costco’s shares take a hit, dropping nearly 10% over two days in early March after sales growth fell short of analyst expectations. However, the stock has since rebounded, reaching record levels in recent weeks.

Analyst Estimates for Q3 2024 Q2 2024 Q3 2023
Revenue $57.89 billion $58.44 billion $53.65 billion
Diluted EPS $3.67 $3.92 $2.93
Net Income $1.63 billion $1.74 billion $1.3 billion

Key Metric: Memberships

Costco, like other warehouse retailers such as BJ’s Wholesale Club (BJ) and Walmart’s Sam’s Club (WMT), relies on memberships to provide access to its stores and generate revenue before customers even enter the store. Costco offers two tiers of memberships priced at $60 per year for Gold Star and business memberships, and $120 per year for executive memberships.

Recent quarters have seen Costco hint at potential membership price hikes, with investors eagerly awaiting any updates on this front during the upcoming earnings report. Analysts are expecting a slight increase in memberships to 73.55 million for the quarter, up from 73.4 million last quarter and 69.1 million a year ago.

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Business Spotlight: Uber Eats Partnership, First Report With New CFO

In the lead-up to Costco’s earnings announcement, the company expanded its market reach through a partnership with Uber Technologies (UBER) announced during Uber’s annual event on May 15. This partnership allows Uber Eats users to order Costco products through the app, regardless of their membership status. Costco members will receive special discounts and can also avail of a 20% discount on an annual Uber One membership.

This earnings report will also mark Costco’s first under its new CFO, Gary Millerchip, who took over from Richard Galanti last month after his nearly 40-year tenure as CFO. Costco’s stock has seen a 21% increase so far this year, reaching $796.34 as of market close on May 23.

As investors eagerly await Costco’s fiscal third-quarter earnings report, all eyes will be on the company’s revenue, net income, membership numbers, and any insights into future plans for membership pricing adjustments. The impact of the Uber Eats partnership and the leadership transition with a new CFO will also be closely monitored to gauge Costco’s performance and strategic direction moving forward.

Read the original article on Investopedia.

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