Starbucks’ Stock To Have Moderate Growth On Mixed Q4 Earnings?

SBUX: Starbucks logo

Starbucks (NASDAQ: SBUX) is scheduled to report its fiscal Q4 2021 results on Thursday, October 28. We expect Starbucks to beat the consensus estimates for earnings but miss for revenues. The company has reported better than expected earnings in each of the last four quarters, while revenues beat consensus for two of the last four quarters. The company saw recovery in demand as lockdown restrictions eased and higher vaccination rates with the International segment leading the recovery. We expect the same to spur the fourth-quarter of FY2021 (FY ends in September) results, as well. Our forecast indicates that Starbucks’ valuation is around $130 per share, which is almost 14% higher than the current market price of $115. Look at our interactive dashboard analysis on Starbucks’ pre-earnings: What To Expect in Q4? for more details. 

(1) Revenues expected to be below consensus estimates 

Starbucks revenues for full-year 2020 were $23.5 billion – down 11% y-o-y, as the Coronavirus pandemic led to lockdowns across the globe resulting in closed restaurants or working in take-away only mode. In the first three quarters of FY 2021 Starbucks revenue recovered to $20.9 billion compared to $17.3 billion in the same period of 2020. Trefis estimates SBUX’s fiscal Q4 2021 revenues to be around $7.6 billion, below the $8.1 billion consensus estimate. Our dashboard on Starbucks revenues offers more details on the company’s operating segments along with our forecast for the next two years.

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(2) EPS likely to beat the consensus estimates

Starbucks’ Q4 2021 earnings per share (EPS) is expected to be $1.10 per Trefis analysis, above the consensus estimate of $1.00. The company’s net income margin fell in 2020 due to much higher operational expenses. 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 is 14% higher than the current market price

Going by our Starbucks’ valuation, with an EPS estimate of around $3.49 for FY 2022 and a P/E multiple of 37.3x, translates into a price of $130, which is around 14% higher than the current market price of $115.

Further, our analysis of Starbucks’ vs. Texas Roadhouse finds Starbucks to be a better investment option. Also, Starbucks’ Peer Comparison summarizes how the company fares against peers on metrics that matter.

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