Costco is set to report its quarterly earnings tomorrow. Its financials are strong and positive earnings may see its price edge higher.
Overview
Costco Wholesale Corporation is an American multinational company which runs a network of big-box stores that are open to members only (warehouse club). In addition to being the biggest retailer of prime beef, organic groceries, rotisserie chicken, and wine as of 2016, Costco ranked as the fifth-largest retailer in the world by 2022.
Financials
Looking at the financial year which ended on the 31st of August 2022 versus 2021. Revenue for the year rose to $226.9bn from $195.9bn and gross profit rose to $27.6bn from $25.2bn. Additionally, EBITDA increased to $9.7bn in 2022 from $8.5bn in 2021, and after all expenses and tax, the net income totalled $5.8bn. A $0.8bn increase year-on-year. As a result, earnings per share in 2022 came in at $13.17, which was $1.87 more than in 2021. Furthermore, total liabilities in 2022 went up by $2.3bn but total assets went up by $4.9bn, which offsets the increase in liabilities. Costco’s cash-on-hand value fell by just over a billion, nevertheless, the company’s equity still grew by $2.6bn YoY.
Technicals
From a technical overview, Costco’s stock is currently trading at $481.21 a share. Since last Thursday it has been in a downtrend, although support sits below. Support levels sit at $474.52 then at $470.48 then a key support point at $466.81. A break below the key support level could see the price drop towards the $450 share price range. On the other hand, towards the upside, at present, the resistance sits at $487.97 then at $491.62 then at $493.83. A break above these points may see the price move towards $500-$510 a share. Looking at the indicators, MACD is negative as the signal line (red) crossed over the MACD line (blue) and RSI is negative as it reads 36.
Summary
Based on the company’s financials, Costco seems like a growing retailer with healthy business operations. As shown above, revenue and profit grew YoY, as well as EBITDA and net income. The company’s assets outweigh its liabilities, providing the business with some flexibility in case it incurred any debts in the future. Overall, successful and growing firm. Based on the technical side, the stock is in a downtrend on the daily timeframe and both indicators are negative. However, support sits firmly below and this could be strengthened by the quarterly earnings report that is due tomorrow. Costco is set to report quarterly earnings of $3.29 a share on revenue of $56.16bn, a positive report could see its share price jump higher, or at least remain in a neutral position. Investors should be wary as a negative report may see the price plummet.
