posted by mark
on Fri, 06/01/2018 - 11:18
Article Link:
Costco released earnings yesterday that beat what Wall Street expected. They also beat revenue numbers.
Apparently, that means you should have a negative opinion of the stock. By all means, sell it!
That makes me laugh. In my opinion, Wall Street thinking is a little twisted. There ought to be a Sunday comic called "Life on Wall Street - another Universe"
Here is some of what I see:
- Their quarterly revenues increased 12.1% and the first 36 weeks revenues increased 12%.:
- Comparable store sales - without gasoline inflation and foreign exchange - increased 7%. With the economy growing at less than 3.5%, they are growing revenues at twice GNP. That looks pretty good in my book.
- Earnings were 1.70 for the quarter compared to 1.59 last year, but last year had a benefit of .19 cents. So, normalized, last year's earnings were 1.40 (1.59-.19). Now 1.70/1.40 is a mathematically a 21% increases.
- Earnings for 36 weeks was 4.74 (diluted) compared to 3.99 last year, Remove the tax benefit of .19 cents from last year. The growth was 25% (4.74/(3.99-.19))!
- While their gross margin dropped from 11.4% to 11 percent they are still killing the bottom line. They are clearly adjusting to competitive forces. Nice move.
- Finally, e-commerce is still increasing exponentially. Granted it’s from a small base, but nonetheless, they’re moving in the right direction.
In my estimate, the PE is high, but it has been in the high 20's for a long time.
I want to know what the Wall Street crowd is smoking. They are clearly in some other dimension.
Beam me up Scotty. There are some scary Klingons down here!
