Costco is the IBD Stock Of The Day for Friday. Shares of the wholesaler surged above a buy point after the company's Q3 earnings beat late Thursday. A number of analysts lifted their price targets on Costco stock following results.
Costco Wholesale late Thursday reported a 13% increase in earnings to $4.28 per share. Revenue climbed 8% to $63.2 billion.
Analysts polled by FactSet expected earnings of $4.24 per share on $63.13 billion in sales.
Total same-store sales increased 5.7%, just below analyst estimates for 6% growth. Excluding gasoline, overall comparable sales increased 8%.
U.S. same-store sales rose 6.6% for the period. Comparable sales for Canada locations climbed 2.9%.
The company's Kirkland Signature brand also outpaced overall sales growth.
Costco ended the quarter with 79.6 million paid household members, up 6.8% from last year but just below expectations for 79.7 million.
CEO Roland Vachris said on the earnings call that Costco has rerouted products, pulled forward summer items or sourced locally-produced goods to help reduce tariff costs and ensure proper inventories.
CFO Gary Millerchip added that the company will continue working with suppliers to ease tariff costs, including moving production and sourcing to other countries.
"We're watching pricing daily, and if not hourly, on every key commodity," Vachris said in the call. He added that they are working with suppliers to lower prices "wherever we can."
Costco says it has already lowered prices on some products, including eggs, butter and olive oil.
Analysts React
CFRA Research lifted its price target on COST stock after results by 30 to 1,130 and kept a buy rating on shares. Analyst Arun Sundaram noted Costco's business model is showing resilience despite a challenging macro environment. Tariff risks appear manageable due to Costco's limited SKU (product inventory) model and "sourcing expertise." Costco also has limited exposure to China, with only about 8% of total U.S. sales tied to China-imported items.
Morgan Stanley raised its price target on COST stock to 1,225 from 1,150 on Friday, The Fly reported. Analyst Simeon Gutman said the results were "true to form," as Costco delivered membership growth, market share gains and maintained comparable sales momentum. Morgan Stanley maintained an overweight rating on the shares.
Evercore ISI, Loop Capital and Bernstein all raised their price targets on COST stock by $5 and kept their buy or outperform ratings on the shares.
Costco Stock
COST stock on Friday swung 3.1% higher, back above a 1,018 cup-with-handle entry on the daily chart.
The buy zone, which stretches 5% beyond the buy point, extends to 1,068.90.
On a weekly chart, the handle buy point is 1039.47.
Costco stock has found support along its 21-day exponential moving average and is bouncing around its 10-day line.
COST stock's 21-day average true range is 1.67%.
The average true range is a metric available on IBD's MarketSurge that gauges the characteristic breadth of a stock's behavior. Stocks that tend to make large jumps or dives in daily action, the kind that can trigger sell rules and shake investors out of a stock, have a high ATR. Stocks that tend to make more incremental moves have lower ATRs.
With the S&P 500 and Nasdaq now in a power trend, investors can buy stocks with ATRs up to 8%, though they should be wary of being too concentrated in high-octane names.
SwingTrader added Costco stock on Friday with a full position on a 1035.49 entry.
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