By Sabrina Escobar
Costco (COST.US) topped earnings expectations, but the stock fell in after-hour trading Thursday following the company’s rare revenue miss.
The company’s fiscal second-quarter revenue of $58.4 billion missed analyst projections for $59.1 billion. Total company same-store sales, adjusted for currency and gasoline price fluctuations, rose 5.8% year-over-year. Analysts had predicted they would tick up 5%.
Earnings of $3.92 a share were higher than estimates for $3.63 a share. Net income got a boost from a $94 million tax benefit from the deductibility of the $15-per-share special dividend announced last year.
Costco’s stock fell 4.6% to $749.63 Thursday afternoon. The stock has gained 19% this year, while the S&P 500 is up 8%.
The company — and its stock — have been reliable outperformers over the past couple of quarters, with strong financial results pushing shares to historic highs. And indeed, Costco has given investors a lot to cheer about: the special dividend, record membership-renewal rates, and consistent sales growth even as overall retail sales slow.
But the stock’s run-up means investors hold the company to a high standard — and a revenue miss wasn’t well-received.
“COST shares have traded more mixed on recent prints,” wrote Oppenheimer analyst Rupesh Parikh ahead of the earnings report. “Following their near-parabolic rally since late October (+40% vs. +25% for the S&P), we see a growing risk of a pullback. For longer term players, we would take advantage of any dips.”
This is the last earnings report under longtime Chief Financial Officer Richard Galanti, who is retiring. His successor, Gary Millerchip, will take over starting March 15. Galanti’s departure comes just a few months after CEO Craig Jelinek stepped down.
Write to Sabrina Escobar at sabrina.escobar@barrons.com