Has Starbucks Stock Priced In An Earnings Beat?

Starbucks (NASDAQ: SBUX) is scheduled to report its fiscal Q1 2021 results on Tuesday, April 27. We expect Starbucks to beat the consensus estimates for revenues and earnings. The company has reported better than expected earnings in each of the last four quarters, while revenues beat consensus for three of the last four quarters. The company saw recovery in demand in the last two quarters as lockdown restrictions eased and with the start of the vaccination drive. We expect the same to drive the second-quarter of FY2021 results as well. Our forecast indicates that Starbucks’ valuation is around $116 per share, which is in line with the current market price of around $117. Look at our interactive dashboard analysis on Starbucks’ pre-earnings: What To Expect in Q1? for more details. 

(1) Revenues expected to be ahead of consensus estimates in Q1

Trefis estimates Starbucks’ fiscal Q2 2021 (ended March 2021) revenues to be around $7.1 billion, 4% above the $6.8 billion consensus estimate. Starbucks revenues of $23.5 billion for FY 2020 (ended Sep 2020) were below the FY 2019 figure, as the pandemic forced restaurants to close down and function in takeaway or delivery mode only. Overall, we expect revenue to recover to around $28.5 billion in FY2021.

(2) EPS likely to beat the consensus estimates

Starbucks’ Q2 2021 earnings per share (EPS) is expected to be $0.70 per Trefis analysis, above the consensus estimate of $0.53. The company’s net income margin fell in 2020 due to much higher operational expenses. This decreased the EPS figure from $2.92 in FY 2019 to $0.79 in FY 2020. The reopening of the restaurants, reduction in restrictions, and lower operational expenses are expected to improve the earnings in 2021. Altogether, the company is likely to report an EPS of around $3.17 in FY2021.

(3) Stock price estimate in line with the current market price

Going by our Starbucks’ valuation, with an EPS estimate of around $3.17 and a P/E multiple of just above 36.6x in fiscal 2021, this translates into a price of $116, which is in line with the current market price of around $117.

Note: P/E Multiples are based on Share Price at the end of the year and reported (or expected) Adjusted Earnings for the full year

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