Starbucks (NASDAQ:SBUX), a retailer of specialty coffee, is expected to release its FQ3 earnings results on Tuesday, August 2, following the market’s closing.
Consensus estimates for the company’s earnings per share are $0.76 (-24.8% year over year) and $8.13B (+8.4% Y/Y) in revenue.
Income history
- Due to China’s strict COVID-19 limits, the company halted its guidance for the remainder of the fiscal year after failing to meet the consensus target in FQ2.
- Net revenue fell by 14% in China, while sales comp dropped by 20% year over year.
- The firm stated that 75% of the net new stores opening in fiscal ’22 would be located outside the United States, highlighting the tremendous worldwide opportunity ahead.
- Over the past two years, SBUX has outperformed revenue projections 50% of the time and outperformed EPS estimates 75% of the time.
EPS projections have seen 27 downward revisions and 0 upward revisions in the last three months. There have been 19 reductions in revenue predictions compared to 2 increases.
Highlights
Six hundred of the company’s 940 locations in China were reopened during the quarter. In a recent earnings call, interim CEO Howard Schultz stated that he expected the company’s Chinese business would eventually surpass its U.S. business. Chinese operations have been seen as a significant growth driver for the company.
When 16 stores in significant cities were to close, Howard Schultz warned that more would follow, citing safety concerns.
The coffee firm recently sold its Russian operations and is thinking about selling its U.K. operations.
The firm, which has been battling with recent attempts by its American staff to unionize, is looking for a long-term replacement as Howard Schultz continues to serve as the acting CEO.
Analyst Score
Citi analyst Jon Tower maintained a Neutral rating on the shares and increased the price objective from $76 to $84. Before “getting the full monty” on the company’s longer-term vision of the firm, investors may need to wait for another earnings season, warns Tower to investors in a research note. On the other hand, the management is expected to “tease the concept” that labor costs may be low and that Starbucks‘ U.S. unit growth over the following 12 to 24 months “may materially increase.” He anticipates higher U.S. comps for the quarter compared to the Street.
With an Equal Weight recommendation on the shares, Morgan Stanley analyst John Glass increased his price target for Starbucks from $87 to $88. To reflect anticipated weaker sales as customers experience increasing pressure, Glass is lowering the second half and 2023 predictions for most of the restaurant and foodservice distributors he covers ahead of Q2 results reporting. He reduced fast casual predictions by around 2% each year and total service estimates by an average of 5% for 2022 and 11% for ’23.
Piper Sandler analyst Nicole Miller Regan up the price target for the shares from $80 to $84 and kept her Neutral rating. Based on her field inspections during the quarter, which showed no significant weakening of demand, the analyst says her North America same-store sales growth of 7.0% could prove cautious compared to the Street’s projection of +8.8%. Miller Regan extended her price objective for Starbucks through the 2023 fiscal year.
Ahead of the company’s Q3 earnings release, Deutsche Bank analyst Brian Mullan decreased his price objective for Starbucks (SBUX) from $103 to $91 and maintained a Buy rating on the stock. Compared to the current consensus of up 8.6%, analysts believe that investors expect U.S. sane-store-sales to increase by 9 and 10%.
The stock receives a Buy recommendation from Wall Street analysts, supported by 10 of 33 analysts’ Strong Buy ratings, six analysts’ Buy ratings, and 17 analysts’ Hold ratings.
The stock saw a downturn of about 27% YTD.
Featured Image: Megapixl © Mehaniq
