Should You Buy Costco Stock Ahead of Q2 Earnings Report?

As Costco Wholesale Corporation COST prepares to unveil its second-quarter fiscal 2026 earnings results on March 5, after the market closes, investors face an important decision: Should they buy the stock now or hold their current positions? With earnings expectations and market conditions in mind, it is crucial to evaluate key factors influencing Costco’s performance and whether the stock offers an attractive entry point ahead of the second-quarter earnings report.

Costco's strategic investments, customer-centric approach, merchandise initiatives and focus on membership growth have enabled it to navigate the market. These strengths have resulted in decent sales and earnings growth, positioning COST as a consumer defensive stock.

Analysts are optimistic about Costco's upcoming earnings. The Zacks Consensus Estimate for fiscal second-quarter revenues stands at $69.22 billion, calling for an 8.6% increase from the prior-year reported figure. On the earnings front, the consensus estimate has improved a couple of cents to $4.53 per share over the past 30 days, implying a 12.7% year-over-year jump.

Costco has a trailing four-quarter earnings surprise of 0.5%, on average. In the last reported quarter, this Issaquah, WA-based company beat the Zacks Consensus Estimate by a margin of 1.9%.
 

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What the Zacks Model Predicts About COST’s Q2 Earnings

As investors prepare for Costco's fiscal second-quarter announcement, the question looms regarding earnings beat or miss. Our proven model predicts that an earnings beat is likely for Costco this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Costco has an Earnings ESP of +0.87% and carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
 

Costco Wholesale Corporation Price, Consensus and EPS Surprise

Costco Wholesale Corporation price-consensus-eps-surprise-chart | Costco Wholesale Corporation Quote

Costco: Key Factors at Play

Costco’s growth strategies, competitive pricing and membership-driven business model have been instrumental in its sustained success. By offering products at discounted rates, the company appeals to shoppers seeking value and convenience. The company's bulk purchasing power and efficient inventory management allow it to keep prices low. This disciplined pricing mechanism helps Costco maintain steady store traffic and robust sales volumes. These factors are expected to have a favorable impact on the overall results. The Zacks Consensus Estimate calls for comparable sales growth of 6.5% for the quarter under discussion.

Costco, in its latest January sales report, highlighted that net sales for the four weeks ended Feb. 1, 2026, increased 9.3% year over year to $21.33 billion. This growth was supported by strong comparable sales gains across regions and a notable contribution from e-commerce channels. Total comparable sales for the period rose 7.1%, supported by gains of 5.8% in the United States, 11.4% in Canada and 9.5% in Other International markets. 

Furthermore, an expanding membership base, rising penetration of higher-value Executive memberships and a younger cohort entering the system all point to a robust membership fee income. Costco is promoting auto-renewal, enhancing targeted digital communication and adding new member benefits such as extended warehouse hours to strengthen engagement and reinforce loyalty. COST is enhancing the online experience with upgraded product pages, improved search and new personalization that recommends relevant items based on members’ search history. The consensus estimate for membership fee income implies an increase of 11.6% to $1,332 million for the quarter under review. 

Costco continuously evolves to meet shifting market demands, regularly updating its product portfolio to include everyday necessities and unique, high-demand items to appeal to diverse customer groups. At the same time, ongoing investments in technology and logistics are reinforcing a seamless multi-channel ecosystem. The Zacks Consensus Estimate calls for growth of 20.7% in digitally enabled comparable sales.

With a clear emphasis on delivering value-oriented offerings, Costco remains well-positioned for continued success in the dynamic retail landscape. However, it is essential to acknowledge the presence of certain headwinds, including underlying inflationary pressures, which might have posed challenges. Moreover, margins remain a critical area to monitor, with potential concerns stemming from any deleverage in the SG&A rate.

Costco Stock Performance

Costco, which competes with Dollar General Corporation DG, Ross Stores, Inc. ROST and Target Corporation TGT, has seen its shares decline 5.9% in the past year against the industry’s rise of 9.1%. While shares of Dollar General and Ross Stores have rallied 107.6% and 45.1%, respectively, those of Target have dropped 7.6% in the aforementioned period.
 

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Does Costco Tick the Boxes for Value Investing?

From a valuation standpoint, Costco currently trades at a premium relative to its industry peers. The company’s forward 12-month price-to-earnings (P/E) ratio is 46.76, higher than the industry average of 33.25 and the S&P 500’s 22.72. However, the stock is trading below its median P/E level of 47.77, observed over the past year. This valuation suggests that while Costco trades below the historical peak, investors are paying a premium relative to its anticipated earnings growth.

Costco is trading at a premium to Target (with a forward 12-month P/E ratio of 14.70), Ross Stores (28.36) and Dollar General (21.56). 
 

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Costco Stock: Buy, Hold or Sell Ahead of Q2 Earnings?

Costco remains a fundamentally strong retailer supported by its resilient membership-driven model, steady traffic trends, expanding digital capabilities and disciplined value-focused strategy. The company continues to execute well operationally, and near-term momentum appears constructive heading into its earnings release. However, the stock’s premium valuation suggests that much of its quality and stability are already reflected in the price, leaving less room for error. For existing investors, maintaining positions appears reasonable given Costco’s defensive characteristics and long-term growth drivers. For potential investors, it may be prudent to wait for either post-earnings clarity or a more attractive entry point before initiating new positions, rather than buying aggressively ahead of the report.

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

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