Costco Stock falls after the warning of weak financial reports

Leader of reduction Costco (COST) posted strong results in the fourth quarter after the close, but was warned of shortcomings in its information technology related to access to financial reporting systems.

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Costco Earnings

estimates: Wall Street expects earnings per share to jump 13 percent to $ 2.34, according to Zacks Investment Research. Revenues are up 4% to $ 44.05 billion. Consensus Metrix expects comparable store sales, excluding gasoline and exchange rate effects, to increase 7.2% overall. It forecasts growth of 7.8% in the United States, 4.6% in Canada and 6.9% in other international outlets.

Results: EPS of 2.36 dollars on income of 44.41 billion dollars. Net sales increased 5% to $ 43.4 billion and member contributions increased 5.7% to $ 997 million. Same-store sales increased 7.2% overall, with increases of 7.8% in the United States, 4.6% in Canada and 6.9% in other international markets. Online sales jumped 26.3%.

Management also cautioned that it expects to report a "significant weakness in internal control" related to IT systems supporting financial reporting processes and to "privileges granted to users authorized to access systems." of the company ".

"As of the date of this publication, no error has been identified in the financial statements as a result of these irregularities, and the Company expects to file its Form 10-K in a timely manner," Costco said in a statement. communicated.

The correction has begun and the company expects corrections to be made before the end of the 2019 financial year.

Costco Shares

Costco fell 3.6% after hours. Shares closed down 0.65% to 231.68 today. MarketSmith's analysis shows that the stock is currently well extended from a 15-week flat base with an entry at 199.98.

Last month, Costco shares moved in and out of the for-profit zone, but are now testing their 50-day average. With shares in a tight three-week zone, a sharp rise in the 50-day line after the release of Costco's results could be an additional buying point for current shareholders.

The relative strength of the stock also showed an upward trend and its share price has risen more than 20% so far in 2018.

The stock has very good fundamentals, which has allowed it to consolidate its top position in the group of large discount chains. It has a very good composite IBD score of 90, but is not ideal. Its excellent market performance is reflected in its relative strength rating of 88.

Meanwhile, BJ's Wholesale Club (BJ) fell 2.6% on Thursday and stands at 20% from its peak, while Sam's parent company Club Walmart (WMT) rose slightly by 0.15% and is up 14% from a recent high.

Mixed Analysts On Costco Stock

Peter Benedict, senior analyst at RW Baird, said economic trends remain robust, although low-margin gasoline sales may weigh. He evaluates the stock as outperforming with a price target of 250.

"With the dynamism of the turnover and rising renewal rates, we believe that the attractiveness of COST as a rare" pillar of growth "remains intact," he said in a statement. a research note.

There could also be an additional sweetener for investors, as Benoît also believes there could be another special dividend over the next year.

At the same time, Rupesh Parikh, senior analyst at Oppenheimer, reiterated his outperformance of the title and raised his price target to 265.

"The strong performance in August gives us more confidence in COST's ability to maintain its momentum, even though comparisons are becoming more difficult," he said in a research note.

According to Parikh, Costco is the best-positioned company in the food and grocery sector to ensure sustainable performance, both in terms of results and results.

However, Barclays' chief executive, Karen Short, recently downgraded Costco to equal weight. This is explained by the excellent performance of the title which allowed him to reach his course objective.

"We have raised our price target four times since taking over September 22, 2016 and improving it on April 20, 2017. The stock is now trading at its highest level for at least 12 years at 16 times our EFF/EBITDA for Exercise 19, "she said in a research note.

Because of her favorable view of the stock, she said investors should wait for "another point of entry in case of weakness."

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