Starbucks (SBUX) Q3 Earnings: China-Asia-Pacific Holds Key

Starbucks CorporationSBUX , which is scheduled to report third-quarter fiscal 2018 results on Jul 26, will be under investors' purview. Investors will not just look at the top and bottom-line performance but will also closely observe its key segments' performance to ascertain whether the strategic initiatives taken by the company have yielded results or not. Let's focus on the company's China-Asia-Pacific (CAP) and find out whether the segment, which has shown tremendous growth in the past few quarters, can continue its robust performance in the to-be-reported quarter.

Impressive China-Asia-Pacific Performance - A Bright Spot

Starbucks' China-Asia-Pacific segment, which witnessed a sharp gain of 54% in second-quarter fiscal 2018 is likely continue the robust performance. Per the Zacks Consensus Estimate, revenues from CAP are expected to witness an improvement of 49.5% to $1,257 million owing to sharp gain in revenues from company-operated stores. Meanwhile, Starbucks brand is gaining popularity across Asia as it is increasingly investing in the Asian markets. Notably, the relatively low per-capita consumption and a burgeoning middle class with rising income levels leads to increasing demand for convenience food and beverages and promise significant growth potential.

Furthermore, per the consensus estimate, Starbucks stores across CAP are likely to increase to 8,270 from 7,995 as of Apr 1, 2018. Management believes that China and the Asia-Pacific region will drive much more meaningful business over the next five years supported by rapid unit growth, growing brand awareness, and increased usage of the digital/mobile/loyalty platforms. Beyond China, the company is facilitating growth in countries like Japan, Korea, Thailand and Indonesia.

In the last reported quarter, the company's new stores have delivered impressive performance and are likely to continue the momentum in the quarter to be reported as well. On the second-quarter fiscal 2018 conference call, the company said that one year ROIs is nearly 80% in China and 45% in Japan.

Starbucks Corporation Price, Consensus and EPS Surprise

Starbucks Corporation Price, Consensus and EPS Surprise | Starbucks Corporation Quote

Overall Q3 Expectations

The Zacks Consensus Estimate for third-quarter earnings is pegged at 60 cents, higher than 55 cents in the year-ago quarter. In the past 30 days, the company's earnings estimates have been stable. In second-quarter fiscal 2018, Starbucks witnessed earnings growth of 17.8% on a year-over-year basis. Meanwhile, the Zacks Consensus Estimate for revenues is nearly $6,259 million, up 10.6% from the prior-year actual figure. (Read More: Starbucks Q3 Earnings: Will Americas, CAP Aid Growth? )

Starbucks has a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Other Stocks to Watch for Earnings

McDonald's Corporation MCD and Dunkin' Brands Group, Inc. DNKN both are slated to report quarterly numbers on Jul 26. Yum! Brands, Inc. YUM is expected to report quarterly numbers on Aug 2.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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