Analysis: COST FDX UPS

After today's market close, both Costco Wholesale (COST) and FedEx (FDX) will report their respective quarterly results. COST shares are in the portfolio, as members know, which means we will be digging into the report and revisiting our price target, as necessary.

While we aren't active in FDX shares, we will be revisiting its recent negative earnings pre-announcement to better understand how much FedEx specific issues are vs. the slowing economy, inflation pressures, and supply chain issues. We'll put what we learn to use as we revisit the portfolio's shares of UPS (UPS) , arguably a much more well-run company and one with more exposure to digital shopping.

As we know, portfolio-holding Costco shares its monthly retail sales figures, which point to total net retail sales for its August quarter of $70.8 billion, up more than 15% from $61.4 billion in the year-ago quarter. The consensus EPS forecast for the quarter is $4.17 vs. $3.04 in the prior quarter and $3.90 in the August 2021 one. The delta between that and the $72 billion consensus total revenue for the quarter is the company's Membership Fee revenue, which was $984 million the prior quarter.

Exiting August, the company had 838 active warehouse locations up from 830 at the end of the prior quarter and 817 at the end of the August 2021 one. When we listen to the company's earnings conference call, we'll be most interested in its warehouse expansion plans for the coming 12 months, its comments on inflation pressures and supply chain expectations, and how it sees the year-end holiday shopping season shaping up vs. last year. Of course, we'll be parsing the usual quarterly earnings metrics as well as the latest membership metrics.

While we remain long-term bullish on COST shares, should the company serve up a quarterly earnings report that doesn't delight the stock market, we will plan to take a beat and let that settle into the share price, eventually adding to the portfolio's position. Our rationale is based on the continued prospects for the company to win consumer wallet share while it grows its membership fee income.