Costco Q4 Earnings Preview: Is Now the Right Time to Buy the Stock?

Core Insights - Costco Wholesale Corporation is set to release its fourth-quarter fiscal 2025 earnings results on September 25, prompting investors to consider whether to buy or hold the stock [1] - The company has demonstrated resilience through strategic investments, a customer-centric approach, and a focus on membership growth, leading to solid sales and earnings growth [2] Earnings Expectations - Analysts project fourth-quarter revenues of $86.23 billion, an 8.2% increase from the previous year, with earnings estimated at $5.82 per share, reflecting a 13% year-over-year increase [3] - Costco has a trailing four-quarter earnings surprise of 0.4%, with a recent quarter beating the Zacks Consensus Estimate by 0.7% [4] Sales Performance - In the fourth quarter, Costco reported net sales of $84.4 billion, an 8% increase from $78.2 billion last year, driven by strong comparable sales growth across regions and e-commerce [9] - Comparable sales rose 5.7%, with a 5.1% gain in the U.S., a 6.3% increase in Canada, and an 8.6% rise in other international markets [9] Membership and Customer Loyalty - Membership renewal rates exceed 90%, indicating strong customer loyalty and providing a reliable revenue stream, with membership fees expected to increase by 10.5% during the quarter [10] - Costco's business model emphasizes value-oriented offerings, which positions the company well for continued success in the retail landscape [11] Valuation Metrics - Costco's forward 12-month price-to-earnings (P/E) ratio is 47.13, higher than the industry average of 30.13 and the S&P 500's 23.52, indicating a premium valuation relative to peers [14][16] - Despite trading below its historical peak P/E level of 50.61, the stock remains at a premium compared to competitors like Target, Ross Stores, and Dollar General [16] Stock Performance - Over the past year, Costco shares have increased by 4.6%, outperforming the industry average of 3.9% and competitors such as Ross Stores and Target [13] - The cautious approach is suggested for new investors, as the Zacks model does not predict a definitive earnings beat, making it prudent to hold existing positions until after the earnings release [17]