Costco Wholesale Corp. is going to offer a special dividend in the near future, say analysts from Stifel and JPMorgan.
Costco COST, -0.47% reported fiscal third-quarter earnings that were well ahead of expectations after Thursday’s closing bell. Same-store sales growth of 5.5% also beat the FactSet consensus for a 5.1% increase.
“We think Costco remains a best-in-class retailer that should continue to lever solid comp growth,” wrote Stifel analysts led by Mark Astrachan. “We also believe it is probable the company declares a special dividend in the next one-to-two quarters.”
Stifel rates Costco shares buy with a price target of $261.
“Stepping back, Costco continues to take outsized share versus peers and most retailers and is a core long-term holding,” wrote JPMorgan analysts. “Moreover, we continue to believe a special dividend is coming ($18.5 per share in total cash on hand).”
JPMorgan, which rates Costco stock overweight with a $252 price target, is particularly bullish about the warehouse retailer, calling its value proposition “unrivaled,” and citing its “loyal” customer base and growth potential.
Costco reported a 90.7% renewal rate in the U.S. and Canada during the third quarter. Around the world, the renewal rate was 88.3%.
“Given the company’s expanding online offering and improved value proposition from its Visa credit offering, we see a runway of share opportunity both in-store and online,” JP Morgan said. “Finally, we note the membership fee increase and competitor Sam’s Club closing ~63 stores in the U.S. and Puerto Rico to start the year; we believe this is a good time to own Costco.”
Sam’s Club is part of the Walmart Inc. WMT, -0.54% portfolio.
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