Starbucks (SBUX) to Report Q1 Earnings: What's in Store?

Starbucks CorporationSBUX is set to report first-quarter fiscal 2017 results on Jan 26, after the closing bell. Last quarter, the company posted a positive earnings surprise of 1.82%.

Starbucks delivered positive earnings surprise in all of the last four quarters, the average being 1.01%.

Let's see how things are shaping up prior to this announcement.

Factors to Consider

Though the company refrained from providing guidance for the first quarter, Starbucks anticipates global comp growth in full-year 2017 in the mid-single digit range. The first half of the year is likely to witness comps at the lower end of the range, with some improvement expected during the second half.

A major decision that Starbucks has dealt with last month was the announcement that Chief Executive Officer (CEO), Howard Schultz, will step down from his post effective Apr 3, 2017. Many analysts remain apprehensive about the decision and believe that this may hit the coffee chain in the near future (read more: Starbucks' Schultz to Step Down: Will the Stock Lose Strength? ) Despite the management shakeup, the company is forging ahead with its expansion plans, with the focus being on China.

Again, a revamped customer loyalty program, now being one of the most popular programs for any retailer, is expected to boost customer engagement and thereby, accelerate comps beyond fiscal 2017.

Starbucks' latest digital offering, Mobile Order and Pay, is also witnessing increasing usage and could prove to be a key growth driver in the to-be-reported quarter as well as in 2017.

However, a challenging environment in the U.S. restaurant space, along with Starbucks' recent sales performance, might be a cause of worry for investors in the near term. Again, stiff competition from companies like McDonald's Corporation MCD may also exert pressure on Starbucks' performance.

Meanwhile, for the first quarter, the Zacks Consensus Estimate for earnings is pegged at 52 cents a share, reflecting an increase of 13% year over year, while the consensus for revenues is at $5.82 billion, implying 8.4% year-over-year growth.

Earnings Whispers

Our proven model does not conclusively show that Starbucks is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.

Zacks ESP: Starbucks' Earnings ESP is 0.00% as the Most Accurate estimate of 52 cents per share is in line with the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank: Starbucks' Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about a positive earnings surprise.

Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Starbucks Corporation Price, Consensus and EPS Surprise

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

Stocks to Consider

Here are some companies in the Retail - Restaurants industry that investors may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:

BJ's Restaurants, Inc. BJRI , with an Earnings ESP of +2.50% and a Zacks Rank #3. It is expected to report its quarterly numbers on Feb 16.

Yum! Brands, Inc. YUM , with an Earnings ESP of +2.82% and a Zacks Rank #3. You can see the complete list of today's Zacks #1 Rank stocks here . The company will report its quarterly results on Feb 8.

Zacks' Top 10 Stocks for 2017

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Starbucks Corporation (SBUX): Free Stock Analysis Report

McDonald's Corporation (MCD): Free Stock Analysis Report

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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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