Baird Maintains Outperform On Costco Ahead Of Wednesday's November Comps Results

Baird reiterated its Outperform rating on Costco Wholesale Corporation COST ahead of the membership warehouse operator’s November sales results due out Wednesday.

The brokerage, which has a price target of $175 on the Costco shares, expects global core comps of 2 percent (similar to October), while its reported comp estimate of 1–2 percent is in line with the Street's 1.5 percent.

Analyst's Take

Analyst Peter Benedict noted that the higher traffic should be a key driver of Costco's near-term sales and should help the company weather continued deflationary pressures on average ticket and weakness in tobacco.

“While compares ticked up ~100bps (~200bps in the U.S.), the shift in Halloween into the November reporting period (Halloween is a strong traffic day for COST) and moving past hurricane-related disruption should benefit U.S. comps relative to October,” Benedict wrote in a note.

In addition, easing comparisons and increased recognition by members of the new co-branded Visa credit card should boost near-term results. The analyst’s bullish thesis is also based on potential U.S./Canadian fee increase and probability of even another special dividend.

At last check, shares of Costco were flat at $151.88.