Buy the Spike in Costco Stock After Earnings?

Exceeding expectations for its fiscal third quarter after-market hours on Thursday, Costco Wholesale COST stock has spiked +4% in today’s trading session. The bulk food and general merchandise provider has been able to weather market volatility, with COST now up +14% year to date and sitting on gains of over +120% in the last three years.

Still, as one of the largest warehouse operators, Costco stock does carry a hefty price tag of over $1,000 a share, making it a worthy topic to decide whether now is a good time to buy.

Costco’s Q3 Results

Attributed to strategic pricing and bulk discounts, Costco saw a steady uptick in membership fee income and comparable sales. Overall, Costo’s Q3 sales increased 8% year over year to $63.2 billion, topping estimates of $63.14 billion.

Comparable sales increased 6%, with membership fee revenue rising to $1.24 billion from $1.12 billion in the comparative quarter. On the bottom line, Costco posted Q3 EPS of $4.28, edging estimates of $4.25 and rising 13% from $3.78 per share a year ago.

E-Commerce & International Expansion

Considering Costo’s comparable sales growth, the company’s expansion is very intriguing, opening 9 warehouses during Q1. This included a relocation site in Melbourne, Australia, and its 37th warehouse in Japan, along with seven new net locations in the U.S. Costco plans to open 10 warehouses during its fiscal fourth quarter, which will include a second warehouse in Sweden, a 20th warehouse in Korea, and its 110th warehouse in Canada.

Taking an Amazon AMZN like approach, Costco also stated it had made progress in building out its digital and e-commerce business with a focus on delivering more personal, relevant experiences by helping members save time and money. Costco’s e-commerce sales grew by 15% during Q3 thanks to Costco Logistics, a delivery service for bulk shipments and large retail items, which also includes haul-away services.

Costco’s Outlook on Tariff Uncertainties

Acknowledging the impacts of tariffs and broader economic uncertainties, Costco CEO Ron Vachris stated the company remains confident in the ability of its operators and merchants to rise to the challenges and continue to offer great service while finding consistent value for members.

Notably, a third of Costco's sales in the U.S. are imported, with items imported from China accounting for roughly 8%. That said, Costco has made steps to pull forward items it needs for the summer while sourcing additional goods produced locally to reduce tariff impacts and ensure inventory levels.

Although Costo doesn’t typically provide forward-looking guidance, Zacks projections call for total sales to increase 8% in fiscal 2025, with FY26 sales forecasted to increase another 7% to $294.05 billion. Plus, annual earnings are expected to rise 11% this year and are projected to spike another 10% in FY26 to $19.76 per share.

Bottom Line

Following its favorable Q3 report, Costco stock sports a Zacks Rank #2 (Buy). Correlating with such, FY25 and FY26 EPS estimates are slightly up over the last 60 days, making Costco’s attractive growth trajectory more compelling. Furthermore, the positive trend of earnings estimate revisions could continue in the coming weeks and would certainly suggest more upside for COST.  

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This article originally published on Zacks Investment Research (zacks.com).

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