Starbucks Stock To Trade Higher Post Fiscal Q2 Results?

SBUX: Starbucks logo

Starbucks stock (NASDAQ: SBUX), the world’s leading roaster, marketer, and retailer of specialty coffee worldwide, is scheduled to report its Q2 2022 results on Tuesday, May 3. We expect SBUX stock to trade higher due to revenues and earnings beating expectations in its second-quarter results. The company is growing organically as it keeps opening more stores around the globe. At the moment, China is the growth epicenter, which is expected to contribute meaningfully to the company’s top and bottom line in fiscal 2022. Notably, Starbucks is able to retain its customer loyalty thanks to its rewards and loyalty programs – which is again an added advantage to the company. SBUX grew its active memberships by 21% in Q1 to exceed 26 million active members. Overall, Starbucks Rewards accounts for 53% of total store spending in its stores, which is the highest level ever and is an increase of three points from fiscal Q1 2021.

Our forecast indicates that Starbucks’ valuation is $95 per share, which is 27% higher than the current market price. Look at our interactive dashboard analysis on Starbucks Earnings Preview: What To Expect in Fiscal Q2? for more details.

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(1) Revenues expected to be slightly ahead of consensus estimates

Trefis estimates Starbucks’ Q2 2022 revenues to be around $7.9 Bil, 4% ahead of the consensus estimate. The company’s first-quarter revenues grew 19% year-over-year (y-o-y) to $8 billion, driven by the store growth and recovering economy. The company’s guidance for 2022 includes opening approximately 2,000 new stores by 2022, and with 484 stores opened up in Q1, the company is well on its track to achieving its goal. For the full year of 2022, we forecast Starbucks’ Revenues to be $32.1 billion, up 10% y-o-y.

With over half of its over 34,000 stores located in Canada and the United States, North America is the company’s largest revenue-producing geographical segment. In Q1, net revenues for the segment increased 23% y-o-y, compared to 12% for the international segment. However, China is the company’s main growth prospect as there is a large adoption of the membership program. There are 18 million members in China, and they pay for over 75% of the segment sales. The average member spends about 20% more than a casual client.

2) EPS is also likely to be comfortably ahead of consensus estimates

Starbucks’ Q2 2022 earnings per share (EPS) is expected to come in at 68 cents per Trefis analysis, 9 cents above the consensus estimate. In Q1, the company reported adjusted earnings per share of 72 cents, up 18% y-o-y. Higher sales, share buybacks, and improved margins led to this increase in EPS.

(3) Stock price estimate higher than the current market price

Going by our Starbucks Valuation, with an EPS estimate of around $3.46 and a P/E multiple of 27.9x in fiscal 2022, this translates into a price of $95, which is almost 27% higher than the current market price.

It is helpful to see how its peers stack up. SBUX Peers shows how Starbucks’ stock compares against peers on metrics that matter. You will find other useful comparisons for companies across industries at Peer Comparisons.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

Returns May 2022
MTD [1]
YTD [1]
Total [2]
 SBUX Return 0% -36% 34%
 S&P 500 Return 0% -13% 85%
 Trefis Multi-Strategy Portfolio 0% -17% 227%

[1] Month-to-date and year-to-date as of 5/2/2022
[2] Cumulative total returns since the end of 2016

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