Is Costco (COST) Stock a Buy Ahead of Q3 Earnings on May 28?

TLDR

• Costco reports Fiscal Q3 earnings after the bell on May 28, with Wall Street watching membership renewal rates as the key metric.
• Worldwide renewal rates have stabilized around 89% for two consecutive quarters after dipping from a high of 90.5%.
• Costco raised its quarterly dividend 13% to $1.47 per share, marking 22 straight years of consecutive dividend increases.
• April comparable sales grew 11.6%, with digital sales up 18.8%, ahead of the earnings report.
• PNC Financial Services increased its COST stake by 7.7% in Q4, buying an additional 44,684 shares worth roughly $540 million.

Costco (COST) opened at $1,094.32 on Wednesday, just shy of its 52-week high of $1,096.50. The stock carries a P/E ratio of 56.91 and a market cap of $485.5 billion.

Costco Wholesale Corporation, COST

Fiscal Q3 earnings drop after the close on May 28. Most on Wall Street aren’t expecting fireworks — but they don’t need them either.

The company’s last quarterly report beat estimates on both the top and bottom lines. EPS came in at $4.58, a penny above the $4.55 consensus. Revenue hit $69.6 billion, edging past the $68.96 billion forecast. Year-over-year revenue growth was 9.2%.

Analysts expect full-year EPS of around $20.31.

Membership fees are the real engine here. In the most recent quarter, Costco posted $1.35 billion in membership fee income against $2.6 billion in operating income. Since those fees carry near-100% margins, they likely account for more than half of total operating profit.

That’s the core of what makes COST different. Gross margins run at just 12.9% — well below Walmart’s 24.9% — yet net margins are roughly on par at 3%. The product isn’t the profit center. The membership is.

The One Number That Matters

Worldwide membership renewal rates have been the single most-watched metric for COST investors over the past year. Rates held at 90.5% from 2023 through early 2025, a stretch that coincided with a roughly 60% rally in the stock.

Then they started slipping. Management attributed the dip to a growing mix of digital sign-ups, who renew at lower rates than in-warehouse members.

The good news: rates appear to have leveled off at around 89% for two straight quarters. That’s not a blowout, but it may be enough. The stock has recovered over the past two quarters, suggesting the market is pricing in stability rather than a rebound.

Management hasn’t given specific guidance for Q3 renewal rates. The tone was measured — stable in the near term, with potential for modest pressure before improvement resumes.

Dividend, Sales, and Analyst Targets

Costco boosted its quarterly dividend 13% to $1.47 per share, paid May 15. That’s the 22nd consecutive year of increases. On an annualized basis, the payout works out to $5.88, yielding about 0.5%.

April comparable sales rose 11.6%. Digital sales jumped 18.8%. Both numbers drew positive reactions from analysts. Oppenheimer raised its price target to $1,160 following the data and the dividend hike.

Among 22 analysts tracked over the past three months, 15 rate COST a Buy, six say Hold, and one says Sell. The average price target sits at $1,102.19 — implying less than 1% upside from current levels.

Institutional Buying Continues

PNC Financial Services added 44,684 COST units in Q4, lifting its total to 626,294 — worth roughly $540 million. Several other funds also added to positions during the quarter.

Institutional and hedge fund ownership now stands at 68.48% of the total float.

At 51x forward earnings — more than 2.5 times the sector average — COST’s valuation leaves little room for error. Steady renewals on May 28 may be all it needs to hold the line.

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