Starbucks (SBUX) Earnings Preview
Starbucks (SBUX) reporting earnings tonight after the close with the Street looking for $0.77 on $7.24B in sales. Next quarter is guided to $0.99 and $8.15B while the FY is $2.99/$28.79B, a 22.4% increase Y/Y. SBUX has closed lower in four of the last five reports with an average closing move of 2.8% and a max move of 8.94%. Shares are currently implying about a 3.3% move. Shares have run strong into earnings over the last month and now sitting at all-time highs. The recent range breakout measured out to $130 and also hitting channel resistance off the July 2020 lows, so potential for a fade simply due to exhaustion. Options flow has been mixed but some bullish buys in the September $130 calls, August $115 calls, and November $115 calls recently. The $144.5B company trades 34.88X earnings, 6X sales, and 36X cash with a 1.45% yield. SBUX is looking to continue executing well on a three-pronged initiative to boost customer traffic introduced earlier this year with digital engagement and a revamped menu in focus. They continue to have one of the best customer loyalty programs in QSR and digital engagement should remain high with 22.9M members and the expansion of their AI-engine Deep Brew. SBUX expects to see benefits subside in Q2 as government subsides go away and they expect to see some ticket moderation as well. They may also face headwinds from higher food prices and labor. Analysts have an average target for shares of $121 with a Street High $142. Guggenheim out Neutral on 7/26 positive on the company’s strong near to medium-term growth rates but believes that the stock will be held back by a high valuation and high investor earnings expectations. The analyst further warns that investors should be cautious about underwriting a structurally higher margin over the long-term. Baird upgrading to Outperform in July as recent U.S. coffee category data points have strengthened their confidence that Starbucks can show upside to near-term comps and earnings estimates but the big picture is the longer-term 6-to-12-month outlook. OpCo positive on 7/16 as major traction from self-help strategies and gains in U.S. mobility data suggest the company’s sales are positioned to outperform. The analyst sees earnings growth above 20% in 2022, far better than any restaurant peer. Short interest is 1.05%. Hedge fund ownership fell 4% in Q1, Pershing Square exiting their entire 10M share position.