Costco Value Proposition 'Continues To Shine' As Analysts Deep Dive Into Q4 Print

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Shares of Costco Wholesale Corporation (NASDAQ: COST) tanked in after-hours trading on Tuesday, although the company delivered an earnings beat for its fiscal fourth-quarter.

The results came amid an exciting earnings season. Here are some key analyst takeaways from Costco Wholesale's earnings release.

  • Truist Securities analyst Scot Ciccarelli maintained a Buy rating, while raising the price target from $597 to $619.
  • BMO Capital Markets analyst Kelly Bania reiterated an Outperform rating, while raising the price target from $600 to $612.
  • Telsey Advisory Group analyst Joseph Feldman reaffirmed an Outperform rating and price target of $575.
  • William Blair analyst Phillip Blee reiterated an Outperform rating on the stock.
Truist Securities: "Strength in necessities continues to drive solid top-line results," Ciccarelli wrote in a note. Costco Wholesale's fourth-quarter comps accelerated sequentially "due to its extreme value proposition, which grows in importance in a slower economy," he added.

"Further, in sharp contrast to many competitors, Costco's margins remain solid (up in the quarter) despite mix shifts towards Consumables due to its razor thin mark-up process on virtually everything it sells," the analyst further stated.

BMO Capital Markets: Costco Wholesale reported another robust quarter, "capping a year of underlying 9% EPS growth by our estimates along with continued strength in customer traffic trends, steady and strong membership renewals, and continued impressive Executive member penetration," Bania said.

With continued execution in a volatile retail segment, the company's consistency "stands out as another factor that supports its premium valuation," he added.

Telsey Advisory Group: Costco Wholesale generated solid membership fee income growth of 13.7% and reported healthy membership renewal rates, Feldman said.

The company exhibited "effective management of inflation" and "solid inventory control," he added. Costco Wholesale's gross margin expansion was also impressive, of 42 basis points, "driven by improvement in Food & Sundries and Non-Foods," the analyst further wrote.

William Blair: "Total company-adjusted comparable growth of 3.8% was led by a 5.2% increase in traffic, partially offset by a 1.3% decrease in average transaction, primarily due to lower demand for high-ticket, discretionary items," Blee wrote in a note.

"U.S. adjusted comparable sales increased 3.1%, driven by a 5% increase in traffic, partially offset by a 1.8% decline in average transaction (excluding the impact of fuel)," he added.

COST Price Action: Shares of Costco Wholesale had risen by 1.43% to $560.86 at the time of publication Wednesday.