Earnings Watch: Costco earnings: Texas and Florida alone could get dozens more warehouses and it wouldn’t be enough

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Costco Wholesale Corp. is scheduled to report fiscal fourth-quarter earnings on Thursday after the closing bell, and bullish analysts expect solid results. Moreover, they’re confident there’s space for plenty more warehouse locations than Costco currently has.

According to Costco’s August sales report, issued September 5, the company operates 783 locations around the world, including 544 in the U.S. and 100 in Canada. There are also e-commerce businesses in the U.S., Canada, the U.K., Mexico, South Korea and Taiwan.

Raymond James analysts led by Budd Bugatch say investor conversations have focused on more locations, with plenty of room for growth both domestically and internationally.

Analysts say California is among Costco’s COST, +0.42%   most dense markets with about 130 locations, or about one warehouse for every 100,000 households. In Florida, there are only 28 locations, or one for about every 275,000 households. And the 33 warehouses in Texas represent one for every 295,000 households.

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“Even building out Texas and Florida to a density of one warehouse per 150,000 to 175,000 (still less than California), would imply the potential for 40-to-55 more warehouses just in Texas and Florida,” analysts wrote.

There’s only one warehouse in China compared with about 23 Sam’s Club locations, with plans to have about 40 by 2020. Sam’s Club is part of the Walmart Inc. WMT, -1.47%   portfolio.

Costco has 16 locations in South Korea and 26 in Japan.

“All in, we continue to forecast about 100 new warehouses (U.S. and international) over the next four years,” Raymond James said.

Raymond James rates Costco stock outperform with a $300 target price.

Costco has an average overweight rating and average $293.91 price target, based on a FactSet poll of 27 analysts.

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Here’s more on Costco ahead of the quarterly announcement:

Earnings: FactSet is guiding for earnings per share of $2.54, up from $2.36 last year.

Estimize, which crowdsources estimates from analysts, fund managers and academics, expects $2.55 per share.

Revenue: FactSet’s outlook is for revenue of $47.45 billion, up from $44.41 billion in 2018.

Estimize is forecasting $47.30 billion.

Costco has already announced same-store sales growth of 5.1%.

Stock price: Costco stock has rallied 40% for 2019 so far, outpacing the S&P 500 index SPX, -1.79%  , which is up 15.2%, and the Dow Jones Industrial Average DJIA, -1.86%  , up 11.8%.

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What else analysts are saying:

-Membership fee income continues to grow: UBS analysts think Costco’s membership fee income rose 5.3% in the quarter to $1.05 billion. Analysts also say average members per warehouse grew 1%.

“Looking ahead, we believe that Costco’s top-notch execution and competitive moat should help to support continued, high 80% worldwide renewal rates for the foreseeable future,” UBS analysts led by Michael Lasser wrote in a note headlined “Still Feels Bullish.”

“Further, its international whitespace opportunity is matched by few. The retailer’s recent China opening is just the latest example showing its ability to resonate with customers outside the U.S.”

UBS rates Cost stock buy with a $335 12-month price target.

Large crowds at the Costco opening in China shut down the warehouse early.

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-Costco will declare a special dividend: Stifel analysts think the retailer will announce a special dividend in the next quarter or two, driving its buy stock rating and $310 price target.

“We anticipate the company will continue to invest in price and digital/e-commerce to further reinforce its value proposition, which we view as key to sustaining favorable comp and traffic trends and continued outperformance relative to peers,” wrote analysts led by Mark Astrachan in a September note.