Costco Wholesale's (COST) fiscal third-quarter earnings are expected to fall short of consensus estimates, though the warehouse club operator is seen expanding its market share, Oppenheimer said in a Tuesday client note.
The brokerage is projecting Costco's third-quarter earnings of $4.75 per share, compared with Wall Street's view that it put at $4.98. The company reported EPS of $4.28 in the year-ago period.
Costco is scheduled to release its latest results on May 28.
That report will likely show a "transitory earnings shortfall" amid mix headwinds related to fuel, ecommerce and pharmacy, Oppenheimer analysts including Rupesh Parikh wrote. "The wild cards for us are expense controls, along with any unexpected gross margin tailwinds that we haven't contemplated," according to the analysts.
Costco shares have gained around 24% so far this year, compared with the S&P 500's 8% advance, Oppenheimer said, betting on further outperformance.
"We believe defensive characteristics of the model and (Costco's) superior value proposition on the omni-channel/fuel fronts should continue to drive outsized share gains," according to the research note.
Earlier this month, Costco reported net sales of $23.92 billion for the four-week period ended May 3, up 13% year over year. For the five weeks to April 5, net sales grew 11% to $28.41 billion, it said last month.
Oppenheimer lifted its price target on Costco shares to $1,160 from $1,100, while reiterating its outperform rating on stock, along with a "top pick" ranking.
"We would be positioned to take advantage of any weakness on the print (versus) playing for a positive catalyst," the analysts said. "Our longer-term thesis remains intact, but near term, we believe (Costco) could also benefit from higher levels of food at home inflation."
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