Costco (COST) Earnings Expected to Grow: Should You Buy?

Costco is expected to report quarterly results for the period ended November 2025 on December 11 with Zacks consensus EPS of $4.24 (up ~11% YoY) and revenue of $67.15 billion (up ~8% YoY). The consensus EPS was revised marginally lower (-0.02% over 30 days) and the Most Accurate Estimate sits below consensus, producing an Earnings ESP of -0.69% and a Zacks Rank of #4, implying a low probability of an upside surprise. The company beat consensus in three of the last four quarters (most recently by +1.03% on $5.87 vs. $5.81), but current signals suggest investors should temper expectations ahead of the print.

Analysis

Market structure: Costco's membership model and scale keep it a defensive winner if consumer spending holds; direct beneficiaries of a resilient Costco print are suppliers with large, stable SKUs (Kroger/CPG suppliers) and competitors with lower margins (WMT, TGT) who may lose share on value perception. A weak print or conservative guidance would hurt mall/department-store peers and discretionary suppliers while modestly pressuring commodity-linked names if inventory liquidation follows. Cross-asset: expect short-term equity volatility and a ~25–60bp move in near-dated implied vol for COST options around Dec 11, with limited bond-market spillover unless guidance signals broader consumer slowdown that would steepen credit spreads in retail debt by 10–30bp.

Risk assessment: Tail risks include a surprise membership-churn print (>1% sequential drop), major supply-chain disruption (port strike) that forces inventory markdowns, or regulatory scrutiny of pricing/membership practices—each could knock 10–20% off near-term EPS. Time horizons: immediate (days) — IV and price reaction to Dec 11 print; short-term (weeks/months) — guidance and holiday comps; long-term (quarters/years) — membership growth and real wages drive durable revenue. Hidden dependencies: fuel margins, commercial sales, and Canadian currency swings can swing quarterly EPS ±5–8%; management tone on inflation passthrough is a key second-order signal. Catalysts: Dec 11 earnings, Dec U.S. retail sales/CPI, and membership renewal update.

Trade implications: If neutral-to-bearish, implement a limited-cost downside hedge: buy Dec-month (exp ~Dec 20) put spread (1–2% portfolio notional) — buy 1–2% OTM put / sell 4–6% OTM put to cap cost; enter 3–5 trading days before earnings to avoid late-premium. For income or neutral stance, sell 30–45d covered calls 2–4% OTM on up to 50% of existing COST holdings to capture elevated premia; close within 2 trading days post-earnings if IV collapses. Pair trade: long WMT (1–1.5% portfolio) and short COST (0.8–1%) if Costco guidance is weak — target 6–10% relative mean reversion.

Contrarian angles: Consensus downsizing of beat probability (Earnings ESP −0.69%, Zacks #4) likely prices only a marginal miss; a small EPS miss but strong membership or guidance could prompt a >5% upside snapback — options IV may be overpriced relative to realized vol. Historical parallel: Costco has beaten 3/4 recent quarters; downside is therefore asymmetric only if guidance materially weakens. Unintended consequence: aggressive short or bought-put exposure could be expensive if membership stickiness and gas margins cushion EPS, turning a modest miss into a muted stock move — favor defined-risk structures.

Key Decisions for Investors

• Establish a defined-risk bearish hedge: purchase Dec-month (exp ~Dec 20) COST put spread equal to 1–2% of portfolio notional (buy 1–2% OTM put / sell 4–6% OTM put). Enter 3–5 trading days before Dec 11 earnings; close within 2–3 trading days after earnings unless guidance confirms trend.
• If overweight COST, sell 30–45d covered calls on up to 50% of holdings at strikes 2–4% OTM to monetize elevated IV; roll or close within 2 trading days after earnings to avoid assignment if stock gaps down. Size premium capture to target 0.5–1.0% income per month.
• Execute a relative-value pair: go long WMT (1–1.5% portfolio) and short COST (0.8–1%) if Costco issues conservative guidance or EPS misses by >3% vs consensus. Target 6–10% relative outperformance; stop-loss if WMT/COST spread narrows by 3%.
• Set concrete monitoring triggers: trim COST by 25–50% if membership growth falls >100k QoQ, same-store comps miss consensus by >200bp, or management lowers FY margin guidance by >50bp; add to longs if membership growth accelerates >200k or guidance lifts EPS by >3%.