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Oct. 3, 2019, 3:20 p.m. EDT

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

Costco stock has rallied 39% for the year to date

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By Tonya Garcia, MarketWatch


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Costco has plenty of room for growth all around the world, analysts say

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 /zigman2/quotes/201191698/composite COST -0.43%   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. /zigman2/quotes/207374728/composite WMT -0.65%   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.

See: How to know which retailers will take the biggest hit from a trade war

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.

/zigman2/quotes/201191698/composite
US : U.S.: Nasdaq
$ 303.29
-1.30 -0.43%
Volume: 417,949
Nov. 15, 2019 10:29a
P/E Ratio
36.66
Dividend Yield
0.86%
Market Cap
$133.17 billion
Rev. per Employee
$600,967
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/zigman2/quotes/207374728/composite
US : U.S.: NYSE
$ 119.87
-0.78 -0.65%
Volume: 1.86M
Nov. 15, 2019 10:29a
P/E Ratio
27.05
Dividend Yield
1.77%
Market Cap
$344.10 billion
Rev. per Employee
$223,654
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