What occurred
Shares of Costco Wholesale ( COST -0.08% ) have been transferring up the charts final month, gaining 11% in March in accordance with knowledge from S&P World Market Intelligence.
The warehouse retailer posted better-than-expected ends in its second-quarter earnings report and acquired some bullish analyst notes over the course of the month. Throughout a month when buyers have been hit by considerations over rising rates of interest, inflation, the battle in Ukraine, and excessive oil costs, Costco additionally appeared to profit from its standing as a steady, recession-proof retailer.
Picture supply: Costco.
The next chart reveals how the inventory gained over the course of the month.
So what
Costco delivered one other robust second-quarter earnings report in early March with comparable gross sales up 11.1%, excluding gasoline and international trade. E-commerce gross sales have been up 12.6%, lapping a increase within the quarter a yr in the past.
Income rose 15.9% to $51.9 billion, beating estimates at $51.5 billion, and earnings per share rose from $2.14 to $2.92 because it lapped 1 / 4 during which it paid out a premium pandemic wage, serving to to carry its earnings. That determine topped expectations at $2.74.
The third quarter additionally appears to be like off to a robust begin as effectively with comparable gross sales up 10.6% via the primary 4 weeks. The inventory truly pulled again on the report, falling 1.4% as shares fell broadly that day, March 4.
A pair of analysts raised their worth targets on the information with BMO Capital’s Kelly Bania citing robust member development, the Q2 earnings beat
The inventory began to ramp greater on March 15 because the broad market bounced again on decrease oil costs, and it jumped once more the following day after the Federal Reserve mentioned it will increase its benchmark charge by 1 / 4 of a proportion level. The Fed additionally mentioned it expects to lift charges seven occasions this yr to assist convey inflation underneath management.
Costco closed the month out on a optimistic word as one other analyst raised their worth goal on the inventory.
Now what
In an setting with excessive inflation, excessive rates of interest and fears of a recession, Costco appears to be like poised to win and decide up market share. The retailer’s membership mannequin helps lock in its prospects and Costco’s buyer base additionally tends to be higher-income than its friends, which means that may higher soak up a recession. Lastly, the corporate’s fame for rock-bottom costs must also assist it win enterprise throughout a tough financial time.
As its February comparable gross sales reveals, enterprise stays brisk at Costco regardless of considerations in regards to the broader financial system.
This text represents the opinion of the author, who could disagree with the “official” advice place of a Motley Idiot premium advisory service. We’re motley! Questioning an investing thesis – even one in all our personal – helps us all suppose critically about investing and make selections that assist us grow to be smarter, happier, and richer.
