[Note: Starbucks’ fiscal year 2022 ended October 2, 2022]
Starbucks stock (NASDAQ: SBUX), the world’s leading roaster, marketer, and retailer of specialty coffee worldwide, is scheduled to report its Q3 2023 results on Tuesday, August 1. We expect SBUX stock to see little movement with revenues matching and earnings beat expectations slightly in its second-quarter results. The company’s Q2 operating margins expanded from 13% in 2022 to 14.3% in 2023, but was still lower than the 14.5% it achieved in Q1, primarily driven by investments in growth in labor, part of which represent the reinvention plan, inflation, and deleveraging in China. We expect a similar trend to continue into the fiscal third quarter as well. Also, the company could see some pressures from greater exposure to China (10% of sales come from there), unionization, and a new CEO appointed this year. It’s possible that Starbucks’ operating trends will be volatile in the next few quarters, but the long-term outlook is bright for this business as it capitalizes on increasing customer satisfaction across its selling footprint. For the full-year 2023, Starbucks expects revenue to be up 10% to 12% this fiscal year, with earnings per share (EPS) up 15% to 20%.
Our forecast indicates that Starbucks’ valuation is $103 per share, which is almost in line with the current market price. Look at our interactive dashboard analysis on Starbucks Earnings Preview: What To Expect in Fiscal Q3? for more details.
(1) Revenues expected to match consensus estimates
Trefis estimates Starbucks’ Q3 2023 revenues to be around $8.5 Bil, almost matching the consensus estimate. The coffee king’s adjusted revenue rose 14% y-o-y to $8.7 billion in Q2, including an 11% increase in comparable sales. The chain posted a healthy balance between rising customer traffic and increased spending, too. Both of these metrics were up 4% y-o-y in Q2. There are now 30.8 million active U.S. loyalty members, a 15% y-o-y increase. The company has nearly 37,000 stores as of Q2, and half of the stores are located in international locations. But by 2030, the goal is to have 55,000 locations running globally – of which China will be a major growth market. The important question here is can the brand continue to expand since it is already ubiquitous? The coffee giant’s management could likely be overly optimistic about its long-term expansion prospects.
2) EPS is also likely to beat the consensus estimates marginally
Starbucks’ Q3 2023 earnings per share (EPS) is expected at 87 cents per Trefis analysis, slightly above the consensus estimate. Q2 EPS was $0.79, up 36% from the prior year. It should be noted that Starbucks’ quarterly sales and diluted EPS were 38% and 49% higher, respectively than the same period in 2019. Starbucks is predicting faster earnings growth in the second half of the fiscal year.
(3) Stock price estimate matches the current market price
Going by our Starbucks Valuation, with an EPS estimate of around $3.45 and a P/E multiple of 29.9x in fiscal 2023, this translates into a price of $103, which aligns with 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 portfolio that aims for long-term growth? Here’s a value portfolio that’s done much better than the market since 2016.
|S&P 500 Return||2%||18%||103%|
|Trefis Multi-Strategy Portfolio||6%||25%||303%|
 Month-to-date and year-to-date as of 7/28/2023
 Cumulative total returns since the end of 2016