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Will Costco (COST) Earnings Beat Estimates This Season? - Analyst Blog

We expect Costco Wholesale Corporation ( COST ) to beat expectations when it reports first-quarter fiscal 2015 results on Dec 10. In the last quarter, it had posted a positive surprise of 4%. Let's see how things are shaping up for this announcement.

Why a Likely Positive Surprise?

Our proven model shows that Costco is likely to beat earnings estimates this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. Costco has the right combination of the two key components.

Zacks ESP: Costco currently has an Earnings ESP of +2.75%. This is because the Most Accurate estimate stands at $1.12, while the Zacks Consensus Estimate is pegged at $1.09.

Zacks Rank: Costco carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1, 2 or 3 have a significantly higher chance of beating earnings estimates. Conversely, the Sell-rated stocks (Rank #4 and 5) should never be considered going into an earnings announcement.

Costco's Zacks Rank #3 and ESP of +2.75% make us reasonably confident of a positive earnings beat.

What's Driving the Better-than-Expected Earnings?

Costco's strategy of selling products at heavily discounted prices, consistent comparable-store sales growth and healthy membership renewal rates are the factors driving better-than-expected results. We believe that Costco continues to be a dominant retail wholesaler based on the breadth and quality of merchandise offered.

Other Stocks That Warrant a Look

Here are some other companies you may want to consider as our model shows that these have the right combination of elements:

FedEx Corp. ( FDX ) has an Earnings ESP of +4.13% and a Zacks Rank #2 (Buy).

Adobe Systems Inc. ( ADBE ) has an Earnings ESP of +5.88% and a Zacks Rank #3.

Red Hat, Inc. ( RHT ) has an Earnings ESP of +3.70% and a Zacks Rank #3.

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COSTCO WHOLE CP (COST): Free Stock Analysis Report

RED HAT INC (RHT): Free Stock Analysis Report

FEDEX CORP (FDX): Free Stock Analysis Report

ADOBE SYSTEMS (ADBE): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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