Earnings season is the heartbeat of the market - and every day brings fresh signals about where money is flowing.
With each report, we learn not just how companies are performing, but how investors are reacting.
In the Daily Beat, we spotlight the most important earnings moves from the prior session - the winners, the losers, and the reactions that reveal what really matters to the market right now.
Whether itβs a bellwether with broad economic implications or a niche name making waves, we cut through the noise to focus on the setups that matter most.
Here are the latest earnings stats from the S&P 500 π
*Click the image to enlarge it
Following last Thursday's closing, the $406B discount store giant, Costco Wholesale $COST, beat its headline expectations and suffered a -3.23 reaction score on Friday.
The company posted revenues of $86.16B, versus the expected $86.01B, and earnings per share of $5.87, versus the expected $5.80.
Now let's dive into the fundamentals and technicals π
Was this earnings report the catalyst for a new downtrend in COST? π»
Costco Wholesale had a -2.9% post-earnings reaction, and here's what happened:
Net sales increased 8% year-over-year, and this growth was reflected in the bottom line, with a 10.9% rise in net income over the same period.
Membership income, a key performance indicator for the company, surged 14% year-over-year. This came with a worldwide renewal rate of nearly 90%, much higher than the industry standard.
On the guidance front, the management team announced it plans to build 35 warehouses and dramatically increase its investment in future growth. While this is likely the right long-term move, the market is concerned about this in the short term due to the impact it will have on near-term cash flows.
As we highlighted in a recent Weekly Beat, this company has consistently grown its top and bottom lines, exceeding the market's headline expectations.
However, the earnings reactions have been anything but consistent. The past seven post-earnings reactions have been the following: drop, rally, drop, rally, drop, rally, drop. This reinforces the range-bound price action we've seen recently.
With the price now putting the finishing touches on a prolonged distribution pattern, we believe the bears are likely to take control of the primary trend.
The surge in capital expenditure is the fundamental catalyst for this new technical downtrend.
So long as COST holds below 920, the path of least resistance is likely to remain lower for the foreseeable future.
Happy Monday!
-The Beat Team
P.S. Small-cap season is here - Steve Strazza and Mary Thwaites went LIVE to talk about which stocks they're buying and why.
