Key Points Costco is reporting excellent performance despite economic pressure. It's enjoying strong engagement with e-commerce. Costco stock is expensive. 10 stocks we like better than Costco Wholesale › Costco Wholesale (NASDAQ: COST) has been a market-beating stock for decades, but it's having a rare off year in 2025. It's down 6% year to date while the S&P 500 index is up 17%. Last week, it released another stellar earnings report, but it got a downgrade from a Wall Street analyst, and the sto ...

Company Overview - Sprouts Farmers Market, Inc. (SFM) has a market capitalization of approximately $15.6 billion and operates over 440 stores, focusing on fresh, natural, and organic foods for health-conscious consumers [1][4] - Costco Wholesale Corporation (COST) has a substantial market capitalization of approximately $414.2 billion, operating a membership-based warehouse model with 908 warehouses globally, including 625 in the U.S. and Puerto Rico [2][8] Market Environment - Both companies are adapting to an evolving retail environment influenced by inflation, changing consumer values, and a focus on affordability and quality [3] - Sprouts Farmers emphasizes curated assortments and disciplined expansion, while Costco leverages its scale and pricing power to drive traffic [3] Sprouts Farmers Market Insights - The market for natural and organic food at home is estimated at around $290 billion, with SFM's private-label products accounting for 24% of total sales [4] - SFM's full-year 2025 guidance includes net sales growth of 12% to 14% [4] - The company plans to open at least 35 new stores in 2025, targeting approximately 10% unit growth, supported by a pipeline of 120 approved sites [6] - E-commerce now represents 15% of total sales, with a 28% year-over-year increase in the first quarter of 2025 [7] Costco Insights - Costco's membership renewal rates are high, at 92.7% in the U.S. and Canada and 90.2% worldwide, contributing to its competitive pricing and customer loyalty [8][10] - Membership fee income increased by 10.4% year-over-year in the third quarter of fiscal 2025 [9] - Costco plans to open 27 new locations in fiscal 2025, bringing its global warehouse total to 914 [11] Financial Performance - The Zacks Consensus Estimate for SFM's current financial-year sales and EPS implies year-over-year growth of 13.6% and 35.5%, respectively [14] - Costco's current fiscal-year sales and EPS are expected to grow by 8.1% and 11.6%, respectively [17] - Year-to-date stock performance shows SFM shares advanced 25.6%, while Costco's gained only 1.9% [20] Valuation Comparison - Sprouts Farmers is trading at a forward 12-month price-to-earnings (P/E) ratio of 29.42, below its one-year median of 31.32 [21] - Costco's forward P/E ratio stands at 47.29, below its median of 50.76 [21] Investment Outlook - Sprouts Farmers appears to hold more near-term promise due to strong momentum in the health-focused grocery segment and disciplined expansion [23] - Costco's premium valuation and sensitivity to discretionary demand may limit short-term upside [23]

Group 1: Stock Split Overview - The first major stock split of 2025 has been announced by O'Reilly Automotive, marking its first forward split in 20 years and fourth since going public in 1993 [17][18] - O'Reilly Automotive's board approved a 15-for-1 forward split, which is expected to take effect after trading closes on June 9, 2025 [18] - The stock split is aimed at making it easier for employees to purchase whole shares rather than fractions, enhancing participation in the employee stock purchase plan [19] Group 2: Company Performance - O'Reilly Automotive's stock has increased over 4,500% since its last stock split two decades ago, indicating strong company performance and effective management decisions [20] - The average age of vehicles on U.S. roads has risen to 12.6 years in 2024, which benefits auto parts suppliers like O'Reilly as consumers tend to keep older vehicles longer [21] - O'Reilly's hub-and-spoke distribution model, with 31 regional distribution centers and nearly 400 hub stores, ensures efficient supply and availability of over 153,000 stock keeping units (SKUs) [22] Group 3: Share Repurchase Program - O'Reilly Automotive has executed a significant share repurchase program, buying back 96.5 million shares for a total investment of $25.94 billion, resulting in a 59.4% reduction in outstanding shares [23] - The reduction in share count due to buybacks is expected to positively impact earnings per share (EPS), making the stock more attractive to investors [23] Group 4: Market Resilience - The demand for auto parts is considered relatively recession-resistant, suggesting that O'Reilly Automotive's stock may continue to rise in the long term [24]

Core Insights - Costco Wholesale Corporation (COST) has experienced a significant stock price increase of 28.7% over the past year, outperforming the industry and the S&P 500 index [1][2] - The company's strong performance is attributed to consistent same-store sales growth, robust membership renewals, and strength in high-frequency consumer categories [2][7] Membership and Growth Drivers - Costco's membership-based business model is a key growth driver, with a high renewal rate of 93% in the U.S. and Canada, and 90.5% globally [8] - The company reported 78.4 million paid household members, a 6.8% increase year-over-year, with executive memberships growing by 9.1% to 36.9 million, accounting for 47.1% of all paid members [9] - Membership fee income rose by 7.4% year-over-year, with a recent fee increase contributing approximately 3% to this income [9] E-commerce and Expansion - E-commerce sales increased by 20.9%, or 22.2% when adjusted for foreign exchange, reflecting Costco's successful digital transformation [10] - The company plans to open 28 new locations, including 25 new warehouses and three relocations, to further expand its physical footprint [11] Financial Position and Investments - Costco ended the second quarter with cash and cash equivalents of $13,158 million, indicating strong liquidity [12] - The company allocated $1.14 billion to capital expenditures in the second quarter and has a $5 billion expenditure plan for fiscal 2025, highlighting its commitment to long-term growth [12] Competitive Landscape - Costco's sales performance occurs in a competitive retail environment, with rivals like Dollar General and Target enhancing their e-commerce capabilities [13] - Monitoring margins is crucial due to potential concerns related to selling, general, and administrative expenses, as well as foreign exchange volatility [14] Valuation and Analyst Estimates - Costco's forward 12-month price-to-earnings ratio is 48.20, significantly higher than the industry's 29.95 and the S&P 500's 18.58, raising questions about the justification of its premium valuation [15] - Analysts have adjusted their estimates, with the current fiscal year estimate decreasing by 9 cents to $17.94, while the next fiscal year estimate increased by 4 cents to $19.73, indicating expected growth rates of 11.4% and 10%, respectively [17]

Core Insights - Costco Wholesale is experiencing a stock price decline, attributed to a bottom-line miss in Q2 earnings, despite achieving a 9% revenue growth, which outpaces competitors like Walmart and Target [10] - The company is on track for a special dividend payment, with a significant increase in cash reserves, growing by 25% year-to-date in Q2 and 35% year-over-year [1][2] - Analysts maintain a Moderate Buy rating for Costco, with a 12-month stock price forecast of $1,030.43, indicating a potential upside of 10.28% [6] Financial Performance - Costco's annual dividend is $4.64, with a dividend yield of 0.50% and a payout ratio of 27.09% [1] - The company has a strong dividend increase track record, having raised dividends for 21 consecutive years, with an annualized 3-year dividend growth of 13.59% [1] - The balance sheet shows increased cash and assets, with an 8.25% rise in shareholder equity, while maintaining low leverage with long-term debt less than 0.25 times equity [3][4] Market Trends - Institutional buying trends are aligning with analyst support, with significant buying activity noted in early 2025, netting $5 billion worth of shares [8] - The consensus target forecasts a 10% gain for Costco's stock, following a 55% increase in the preceding 12 months, with high-end targets suggesting further potential for growth [7] - Despite the recent stock price drop, long-term investors and institutions continue to provide support, indicating a likely sideways trading pattern until later in the year [11]