Costco Stock Falls Despite Earnings Beat. Here's Why

outside of costco wholesale gas station in Nanjing, Jiangsu Province of China, 2024

(Image credit: Xu Jie/VCG via Getty Images)

Costco Wholesale (COST) stock is struggling Friday after the membership warehouse's appearance on the earnings calendar. While COST beat revenue and earnings expectations for its fiscal 2024 third quarter, the company kept membership fees unchanged at current rates.

In the 12 weeks ended May 12, Costco's revenue increased 9.1% year-over-year to $58.5 billion. Comparable store sales were up 6.5% when excluding the impacts from changes in gasoline prices and foreign exchange, while e-commerce sales surged 21% on strong demand for gold bars and silver coins.

COST also said its earnings per share (EPS) jumped 29% from the year-ago period to $3.78.

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The top- and bottom-line results cruised past analysts' expectations. According to CNBC, Wall Street was anticipating revenue of $58.1 billion and earnings of $3.70 per share.

When asked on the conference call about a possible membership fee increase, Costco Chief Financial Officer Gary Millerchip said that even though the company is well beyond the typical five years for an increase, it is still evaluating "high inflation and the risk and concern around recession" to determine when the right time will be to raise fees.

Costco also eased concerns about raising the price of its $1.50 hot dogs. Although the company cut off access to non-members earlier this year, Millerchip confirmed in the earnings call that the "price is safe."

Is Costco stock a buy, sell or hold?

Overall, analysts remain generally upbeat toward the retail giant. According to S&P Global Market Intelligence, the consensus analyst target price for COST stock is $805.82, representing implied upside of about 1% to current levels. Meanwhile, the consensus recommendation is a Buy.

Financial services firm UBS is one of the most bullish firms on Costco stock with a Buy rating and a $940 price target.

"COST posted yet another quarterly result which indicated continued significant market share gains and broad-based strength across the business, with its worldwide traffic growing 6% year-over-year, discretionary business outperforming, and its operating margin reaching the highest quarterly level in nearly 24 years," UBS Global Research Michael Lasser said in a report. "We think COST will likely have even more levers to increase its dominance in the retail industry in the coming years."

The $940 price target represents implied upside of about 18% to current levels.

Joey Solitro is a freelance financial journalist at Kiplinger with more than a decade of experience. A longtime equity analyst, Joey has covered a range of industries for media outlets including The Motley Fool, Seeking Alpha, Market Realist, and TipRanks. Joey holds a bachelor's degree in business administration.