Starbucks Lifts Full-Year Guidance But Q2 Earnings Mixed

Coffee chain Starbucks (SBUX) reported mixed fiscal second-quarter earnings and raised 2021 views after the close today. Starbucks stock fell late.




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The company reports as digital demand and a reopening economy help sales recover from coronavirus-related service restrictions, and as analysts wonder about Wall Street’s expectations for the stock, which is floating near record levels.

Starbucks Earnings

Estimates: Wall Street expected Starbucks earnings to climb 63% to 52 cents per share, according to Zacks. Revenue was expected to increase 13% to $6.8 billion.

Consensus Metrix forecast overall same-store sales to rise 17.5%. U.S. same-store sales were seen up 7.4%. Those sales were expected to jump 98.9% in China and 47.6% internationally. In Starbucks’ Americas segment, same-store sales were expected to increase 7.5%.

Results: EPS of 62 cents on revenue of $6.67 billion. Same-store sales increased 15%, driven by a 19% increase in average ticket, partially offset by a 4% decline in comparable transactions. U.S. and Americas comps were up 9%, and China comps shot up 91%. Total international comps grew 35%.

Active Starbucks Rewards membership in the U.S. swelled 18% to 22.9 million.

Outlook: Starbucks now sees full-year EPS of $2.90-$3.00, up from a prior view of $2.70-$2.90 and above consensus for $2.84, on revenue of $28.5 billion-$29.3 billion, up from a prior view of $28 billion-$29 billion and largely above consensus for $28.6 billion.

Management backed its comp sales growth view of 18%-23%, with the U.S. up 17%-22% and China up 27%-32%.

Starbucks Stock

Shares fell 1.7% late after closing up 0.2% at 116.15 in the stock market today. Starbucks stock touched a record-high 118.98 on April 19 and are less than 3% off that level.

However, the stock has weak ratings from IBD. Its Composite Rating is 44. Its EPS Rating is 34.

McDonald’s (MCD) rose 1.15% to 234.98. Shares of the burger chain, which reports first-quarter results Thursday, are within buy range of a cup base. The buy point of that base is 232.01.

Dominos’s Pizza (DPZ) rose 0.2%. Domino’s also reports earnings on Thursday.


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Adapting To ‘Realities’

The chain reports results as it starts to lap trends from last year, when Covid-19 spread through China and then to rest of the world, temporarily closing stores, limiting indoor service and hurting sales.

Demand since then has been on the rebound. But revenue during Starbucks’ first quarter, which ended Dec. 27, was still down from a year earlier.

“We believe that many of our customers have adapted to their work- or study-from-home realities,” CEO Kevin Johnson said on the Starbucks earnings call for Q1 in January.

In the process, Starbucks stock has rebounded. The chain has worked to steer more consumer orders through drive-thru, digital and curbside pickup. With more people working from home, group ordering has become more common.

Cold beverages — like its Iced White Chocolate Mocha and Iced Chai Lattes — have remained popular. Starbucks’ loyalty program has continued to attract users. Food items, like breakfast wraps, “outperformed” expectations, management said in January.

Analysts On Starbucks Stock

Oppenheimer analysts last week called Starbucks stock one of their top picks — even following the run-up in the stock’s price. They raised their price target and earnings-per-share forecasts for this fiscal year and next.

Quo Vadis Capital analyst John Zolidis, in a research note on Monday, said Starbucks had easy comparisons in the near term. But he said that the state of Starbucks stock appeared to reflect high expectations for growth.

He said that aside from questions surrounding labor and tax rates, the fundamental story for Starbucks stock was “unblemished.”

“However, it is also largely unchanged relative to the past several years, in our opinion,” he said. “In this context, we struggle to understand why now is the time SBUX shares should be granted their highest valuations in nearly 17 years.”

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