Starbucks Prepares for Q4 Earnings Amid Growth Concerns
Seattle-based Starbucks Corporation (SBUX), with a market cap of approximately $110.2 billion, has transformed the coffeehouse experience. With over 38,000 stores globally, Starbucks has elevated coffee to a lifestyle, presenting not just premium blends but also offering Teavana teas, La Boulange bakery items, and Evolution Fresh juices.
Earnings Anticipation
As the company readies to reveal its Q4 earnings after the market closes on Wednesday, Oct. 30, analysts expect Starbucks to report a profit of $0.84 per share. This figure reflects a decline of 20.8% from $1.06 per share in the same quarter last year. Over the previous four quarters, Starbucks has either met or exceeded consensus estimates two times while falling short in two other instances. Its fiscal Q3 adjusted EPS of $0.93, which was down 7% year over year, aligned with projections.
Future Projections
Looking ahead to fiscal 2024, analysts project Starbucks will report an EPS of $3.34, a drop of 5.7% from $3.54 reported in fiscal 2023. However, the outlook becomes more optimistic, with expectations for the company’s earnings to rebound by 4.5% year over year, reaching $3.49 per share in fiscal 2025.
Stock Performance Analysis
In the past 52 weeks, SBUX has struggled against the S&P 500 Index’s ($SPX) 38.7% gains, with Starbucks shares increasing by only 3.5%. It also lagged behind the Consumer Discretionary Select Sector SPDR Fund’s (XLY) 11.9% gains during this period.
Challenges and Opportunities
Starbucks has encountered a mixed landscape in 2024. The stock has suffered following disappointing performance in the second and third quarters. Global sales and margins have seen a decline, particularly in China, where same-store sales dropped 14% primarily due to increased competition and a weaker consumer market. Despite these challenges, the company has maintained a tradition of consistent dividend increases, which reassures some investors amidst growth concerns.
On a positive note, Starbucks has demonstrated impressive growth with 13 consecutive years of dividend increases. Additionally, it actively expands its footprint, having added 526 net new stores in Q3, bringing the total to 39,477 locations.
Leadership and Market Outlook
With new CEO Brian Niccol leading the way, the company aims to revisit its foundational principles focused on quality, customer experience, and a renewed emphasis on the U.S. market. While the brand remains reliable, uncertainties surrounding its long-term growth pose challenges for its stock price.
Analysts’ Ratings and Future Outlook
The consensus rating for Starbucks stands at a “Moderate Buy”. Out of the 27 analysts monitoring the stock, 16 recommend a “Strong Buy,” one suggests a “Moderate Buy,” eight propose a “Hold,” one advises a “Moderate Sell,” and another rates it as a “Strong Sell.”
The average price target of $101.48 indicates a potential upside of 4.3% from the current price levels.
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On the date of publication, Sristi Jayaswal did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are solely for informational purposes. For more information, please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
