Starbucks’ Profit Outlook Disappoints; Shares Fall

Starbucks Corp. reported mixed first-quarter results (period ending Dec. 27, 2021). In the reported quarter, profit beat Street estimates, while sales fell short of expectations. Looking ahead, the coffee chain’s 2Q earnings outlook missed analysts’ expectations, which dragged the stock down by 1.7% in Tuesday’s extended trading session.

Starbucks’ (SBUX) 1Q earnings of $0.61 per share topped Street estimates of $0.55 per share but declined 22.8% year-over-year due to lower sales and margins. Revenue fell 5% to $6.75 billion and missed analysts’ forecasts of $6.93 billion.

The coffee chain reported that the year-over-year decline in sales was a result of lower traffic and reduced operations amid the pandemic-led store closures.

The company’s global comparable-store sales (comps) decreased by 5% year-over-year due to a 19% decline in comparable transactions. However, the average ticket increased 17% during the quarter. Comps declined 5% in the US but increased 5% in China.

As for 2Q, Starbucks expects to report earnings in the range of $0.45 to $0.50 per share, which is well below analysts’ estimates of $0.59 per share.

For fiscal 2021, Starbucks forecasts earnings in the range of $2.70-$2.90 per share, compared to consensus estimates of $2.81 per share. The company anticipates 2021 revenue in the range of $28-29 billion, compared to analysts’ expectations of $28.5 billion. Starbucks sees global comps growth of 18% to 23% in 2021. (See SBUX stock analysis on TipRanks)

Ahead of the earnings results, Goldman Sachs analyst Jared Garber on Jan. 19 initiated coverage on the stock with a Buy rating and a price target of $115 (9.9% upside potential). In a note to investors, Garber said that large chains should benefit from the “rapid digital transformation and independent restaurant challenges.”

The analyst believes that Starbucks should also benefit from the economic re-opening in 2021.

Overall, consensus among analysts is a Moderate Buy based on 9 Buys and 9 Holds. The average analyst price target of $110.06 implies upside potential of about 5.1% to current levels. Shares have gained 16.1% in one year.

Furthermore, TipRanks data shows that financial bloggers have a bullish call on the stock.

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