Costco's Earnings: What Analysts Think Ahead of the Big Reveal

As Costco Wholesale (COST) prepares to report its fiscal second-quarter earnings after the market closes on Thursday, analysts are weighing in with their expectations and ratings for the retail giant. With the stock up 14% this year and 40% over the past year, investors are eager to see if the company can maintain its strong momentum.

Analysts expect Costco to report earnings per share (EPS) of $4.13 on revenue of $63 billion, up from EPS of $3.92 on revenue of $58.44 billion a year ago. While these projections indicate solid growth, they are still single-digit percentage increases, which is in line with the company's historical performance.

The majority of analysts rate Costco's stock as a "buy," with 12 of the 18 analysts tracked by Visible Alpha issuing a "buy" or equivalent rating for the stock, compared to six "hold" ratings. However, their average price target of $1,063 is just 1.5% above Monday's close, indicating that while analysts are bullish on the stock, they may have tempered expectations for its short-term performance.

One key metric analysts are focusing on is comparable store sales (comps), which measure sales growth at stores open for at least one year. In January, Costco reported a 7.5% year-over-year increase in comps, with a 9.2% jump in the U.S. and a 13.6% increase in online sales. Analysts expect full-quarter comps to come in at 6.6% growth from the same time last year.

Another important factor analysts are considering is the impact of Costco's membership fee hike, which went into effect in September. Executives have said that the higher fees will likely have a more significant impact on margins in the back half of the fiscal year and into fiscal 2026. However, analysts expect the fee increase to positively impact Costco's profitability.

Costco's strong brand loyalty among members, with a 92.7% renewal rate in the U.S. and Canada in 2023, is also a key metric analysts are monitoring. The company has taken steps to crack down on membership sharing, which could potentially erode its profits. In January, Costco began requiring customers at some stores to scan their member cards for access to the building. Analysts will be interested in how these policy changes may have affected Costco's membership figures and overall earnings potential.

In conclusion, analysts expect Costco to report solid revenue and profit growth in its fiscal second quarter, with a focus on comps, the impact of the membership fee hike, and membership renewal rates. While the majority of analysts rate the stock as a "buy," their average price target indicates that they may have tempered expectations for the stock's short-term performance. As Costco reports its earnings on Thursday, investors will be looking for commentary from management on these key metrics and trends.