BMO Capital Reaffirms "Outperform" Rating on Costco (COST)

BMO Capital Reaffirms “Outperform” Rating on Costco (COST)


BMO Capital reported on Wednesday that it has reaffirmed its current “Outperform” rating on discount retailer, Costco Wholesale Corporation (COST).

The firm has reiterated an “Outperform” rating and $115 price target on COST, suggesting a 10% upside from the stock’s current price of $103.75.

Analysts have maintained their rating based on Tuesday’s strong second quarter earnings which beat estimates. Costco’s earnings were positively affected by solid membership fees, increased interest income, and a lower tax rate.

A BMO Capital analyst commented, “strong results in 2Q13 support our Outperform thesis; operating profit increased 14.6% and adjusted EPS increased 22.9%,” analyst Karen Short states. “The increases in operating profit and EPS are slightly better than the increases seen in 1Q13. We believe COST will continue to experience strong results while making progress on three of the more long-term tenets of our thesis: (1) ROIC should continue to improve; (2) market share gains will continue, given COST’s superior positioning (and as evidenced by traffic trends at COST vs. peers), and (3) 4%-5% unit growth is achievable.”

Looking ahead, the firm sees FY2013 earnings of $4.52 per share, which is above the average estimate of $4.51 per share.

Costco shares were mostly flat during premarket trading Wednesday. The stock has increased 16% in the past year.

The Bottom Line
Shares of Costco Wholesale Corporation (COST) have a 1.06% yield, based on Tuesday’s closing price of $103.75.

Costco Wholesale Corporation (COST) is not recommended at this time, holding a DARS™ Rating of 3.4 out of 5 stars.

Be sure to visit our complete recommended list of the Best Dividend Stocks, as well as a detailed explanation of our ratings system here.