Should Costco Stock Be in Your Portfolio Ahead of Q1 Earnings?

Core Viewpoint - Costco Wholesale Corporation is set to release its first-quarter fiscal 2026 earnings results on December 11, and investors are evaluating whether to buy or hold the stock based on earnings expectations and market conditions [1] Financial Performance Expectations - Analysts project first-quarter revenues of $67.28 billion, reflecting an 8.3% increase year-over-year, with earnings per share (EPS) expected to rise to $4.25, indicating an 11.3% year-over-year growth [3][8] - The trailing four-quarter earnings surprise average for Costco is 0.2%, with the last quarter showing a 1% beat against the Zacks Consensus Estimate [4] Sales and Earnings Estimates - Current quarter sales estimate is $67.28 billion, with a high estimate of $67.82 billion and a low of $66.84 billion; year-over-year growth for the current year is estimated at 10.25% [5] - EPS estimates for the current quarter stand at $4.25, with a year-over-year growth estimate of 11.26% [6] Growth Drivers - Costco's strategic investments, customer-centric approach, and focus on membership growth have led to solid sales and earnings growth, positioning it as a consumer defensive stock [2] - The company reported net sales of $65.98 billion for the first quarter, an 8.2% increase from the previous year, driven by strong comparable sales and a 20.5% growth in digital sales [11][8] - Membership growth is expected to contribute significantly, with an anticipated 11.3% increase in membership fees during the quarter [12] Competitive Positioning - Costco's competitive pricing and membership-driven model have been key to its success, allowing it to maintain steady store traffic and robust sales volumes [10] - The company is adapting to market demands by regularly updating its product offerings and investing in technology and logistics [13] Valuation Insights - Costco's forward 12-month price-to-earnings (P/E) ratio is 43.71, higher than the industry average of 30.16, indicating a premium valuation relative to peers [17][18] - Despite trading below its historical peak, Costco's premium valuation may deter some investors, but its steady growth and financial health suggest potential for further upside [19] Investment Considerations - Current investors may consider holding or adding to their positions, while prospective investors might view any dips as buying opportunities [19][20] - The stock's high valuation and recent underperformance are countered by consistent traffic, strong membership growth, and effective operations, making Costco a reliable investment option ahead of the earnings release [20]