Costco Rises on Strong Earnings, Positive Analyst Response

JPMorgan thinks Costco could announce a special dividend

Costco Wholesale Corporation (NASDAQ:COST) is trading up 4% at $225.50, after the company's fiscal second-quarter earnings came in substantially higher than analysts expected, with investors applauding an easing of pricing pressure in the grocery business. Several price-target hikes have come through following the report, and UBS set the highest mark at $270.

Moreover, J.P. Morgan Securities set a $248 price target, up from $240, and said the results increase the chances of a special dividend from Costco. Investment research firm Gordon Haskett said the company's size should help it obtain products cheaply, and it will especially benefit in areas where prices are rising due to tariffs.

Heading into earnings, call buying was prevalent at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Data there shows a 10-day call/put volume ratio of 1.67, a reading that ranks in the 85th annual percentile. There was also notable selling at the March 230 call, which saw the largest increase in open interest in the past couple weeks.

Turning back to the charts, COST stock has now successfully filled its bear gap from the last earnings release in December. This also puts the shares firmly atop the 200-day moving average, an important trendline they've been battling in recent weeks. Over the past 12 months the equity has added almost 16%, and even before today traded as high as $245.16 in September.