Costco Wholesale's (COST) fiscal fourth-quarter core earnings are likely to fall short of Wall Street's estimates, excluding potential tariff-related refunds, Oppenheimer said in a Wednesday client note.
The brokerage projects Costco's per-share earnings of $6.34 for the fourth quarter versus market expectations that it put at $6.55. The consensus view represents "a best-case scenario," assuming the company controls expenses and doesn't reinvest excess fuel profits in the business.
Oppenheimer expects fuel, e-commerce and pharmacy to weigh on the warehouse club operator's margin mix. Costco is scheduled to release its latest financial results next week.
Costco had begun submitting refund claims for tariffs imposed under the International Emergency Economic Powers Act last year, Chief Executive Roland Vachris told analysts during a third-quarter earnings call in May. Those tariffs were struck down by the US Supreme Court earlier in 2026.
"These submissions will go in over what may be the next few months, and based on what other claimants have experienced, we should start receiving refunds on approved claims on a rolling basis over the following two to three months," Vachris said on the call at the time.
Costco planned to return refunds to eligible members.
Oppenheimer assumes Costco received most tariff refunds in the fourth quarter, and would reinvest them for the year ending August 2027. "We believe profit headwinds related to reinvestment could materialize in (fiscal 2027)," the brokerage's analysts including Rupesh Parikh wrote in the note.
Last month, Walmart (WMT) Chief Financial Officer John Rainey said the retail giant received "substantially all" of the roughly $2.9 billion of tariff refunds it was eligible for, and aimed to reinvest that into pricing and merchandise. Target (TGT) lifted its full-year outlook in August as tariff refunds helped double its fiscal second-quarter earnings year over year.
Earlier in the week, RBC Capital Markets said Costco likely faced core gross-margin pressure in the fourth quarter from higher fuel and transportation costs. However, RBC expected tariff-related refunds to offset that impact partially.
Crude oil prices have rallied so far this month as hostilities in the Middle East broadened.
Costco's shares were flat in Wednesday trading, and have gained 4.5% so far this year. That year-to-date move compares with an 11% increase in the S&P 500 index. Target's stock has surged 58%, while Walmart is down 2.7%.
The warehouse chain's stock has fallen after seven of its last 10 earnings releases, Oppenheimer wrote in the report.
"We would be positioned to take advantage of any weakness on the print vs. playing for a positive catalyst," Parikh said. "Investor sentiment is very negative towards (Costco's) prospects, which we view as an intermediate-term positive."
Oppenheimer has an outperform rating on Costco's stock, with a 12- to 18-month price target of $1,160.
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