Costco's Earnings Momentum and Strategic Positioning: A Buy Opportunity Before the September 25 Earnings Release

Costco Wholesale Corporation (COST) has long been a cornerstone of the retail sector, combining a membership-based model with a relentless focus on value to build a loyal customer base. As the company prepares to release its Q4 2025 earnings on September 25, 2025, the confluence of strong financial performance, strategic expansion, and analyst optimism creates a compelling case for investors to consider Costco a buy opportunity ahead of the report.

Earnings Momentum: A Track Record of Outperformance

Costco's recent financial results underscore its ability to navigate macroeconomic challenges while delivering consistent growth. For Q3 2025, the company reported earnings per share (EPS) of $4.28, exceeding the $4.24 consensus estimate. This outperformance follows a pattern: Costco has beaten Wall Street's earnings expectations in three of the last four quarters. Analysts now project Q4 2025 EPS of $5.80, a 12.6% increase compared to $5.15 in the same period of 2024. For fiscal 2025 as a whole, EPS is expected to reach $17.97, up 11.6% from $16.11 in fiscal 2024. Historically, Costco's earnings releases have shown positive market reactions, with past events yielding a maximum return of 7.52% in certain instances. The company's revenue growth, while modest at 1% year-over-year in Q4 2024, is underpinned by high-margin membership fees. Membership revenue alone contributed $1.24 billion in the most recent quarter, with the total membership base expanding to 76.2 million households—a 7.3% year-over-year increase. This recurring revenue stream provides a stable foundation, even as the company raised membership fees by $5 in September 2024. The 90.5% renewal rate further highlights customer loyalty, a critical advantage in a competitive retail landscape.

Strategic Positioning: Global Expansion and Digital Innovation

Costco's strategic initiatives are equally impressive. The company plans to open 25–30 new warehouses annually, with 29 new locations scheduled for fiscal 2025. Its global footprint now includes 891 warehouses across 12 countries, with strong performance in the U.S., Canada, and international markets. For example, comparable sales grew 5.4% globally in Q4 2024, with the U.S. market contributing 5.3% and international markets averaging 5.7%.

E-commerce is another key growth driver. Costco's digital sales surged 18.9% year-over-year in Q4 2024, though this growth slowed slightly from 20% in the prior quarter. This deceleration is attributed to cautious consumer spending and lower gasoline prices, not a lack of demand. The company's “treasure hunt” product rotation strategy—frequent inventory changes to drive repeat visits—has also proven effective, boosting traffic and average transaction sizes.

Analyst Optimism: A “Moderate Buy” with Upside Potential

Analysts remain cautiously optimistic about Costco's prospects. Of the 32 analysts covering the stock, 15 recommend a “Strong Buy,” four a “Moderate Buy,” and 13 a “Hold.” The mean price target of $1,094.18 implies a 17.2% upside from current levels. This optimism is supported by Costco's ability to maintain profitability despite inflationary pressures and its strategic focus on cost management. For instance, net income in Q4 2024 rose 9% to $2.354 billion, aided by a non-recurring tax benefit of $63 million.

However, technical indicators present a mixed picture. The stock has experienced a 3.68% price decline in recent weeks, with bearish signals like the MACD Death Cross and oversold Williams %R readings. Yet institutional investors remain bullish, with a 50.88% inflow ratio from large-cap investors, suggesting confidence in Costco's long-term trajectory.

Why This Is a Buy Opportunity

The combination of Costco's earnings momentum, strategic expansion, and analyst optimism creates a compelling case for investors. Here's why:

1. Membership Model Resilience: Costco's membership fees provide a high-margin, recurring revenue stream. Even after a fee increase, the company's 90.5% renewal rate demonstrates customer loyalty, a critical advantage in a sector prone to price sensitivity.
2. Earnings Growth Potential: With analysts projecting 10.9% EPS growth in fiscal 2026, Costco's valuation—though elevated (forward P/E of 52.07)—is justified by its consistent earnings trajectory. The historical performance of its earnings releases further supports confidence in its ability to drive shareholder value.
3. Global and Digital Expansion: The company's plans to open new warehouses and expand e-commerce sales position it to capture growth in both traditional and digital retail channels.
4. Analyst Price Targets: The 17.2% upside potential from current levels suggests that the market may underprice Costco's long-term value, especially if the September 25 earnings report exceeds expectations.

Risks to Consider

While the case for Costco is strong, investors should remain mindful of potential headwinds. A slowdown in consumer spending, particularly in the U.S., could pressure sales. Additionally, the company's reliance on membership fees means any significant drop in renewal rates could impact revenue. However, Costco's track record of navigating economic cycles—such as the 2020 pandemic and 2022 inflation spike—suggests it is well-positioned to adapt.

Conclusion: Positioning for the September 25 Earnings Report

Costco's Q4 2025 earnings report on September 25 is a pivotal event for the company and the retail sector. Given its strong fundamentals, strategic initiatives, and analyst optimism, the stock appears undervalued relative to its growth potential. Investors who position themselves ahead of the report may benefit from a potential upward re-rating if the results exceed expectations.

For those seeking a long-term investment in a company with a proven business model, disciplined cost management, and a clear growth strategy, Costco represents a compelling opportunity. As the retail landscape evolves, Costco's membership-driven approach and global expansion efforts are likely to sustain its competitive edge.

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