What's in the Offing for Starbucks (SBUX) in Q4 Earnings?

Starbucks Corporation SBUX is scheduled to report fourth-quarter fiscal 2020 results on Oct 29, after the closing bell. In the last reported quarter, the company’s earnings surpassed the Zacks Consensus Estimate by 24.6%.

Q4 Estimates

The Zacks Consensus Estimate for fourth-quarter earnings is pegged at 32 cents. Notably, the company had reported earnings of 70 cents in the prior-year quarter. Over the past 30 days, the company’s earnings estimates have been revised upward by 3.2%. For quarterly revenues, the consensus mark is pegged at $6.07 billion, suggesting a decline of 10.1% from the year-ago reported figure.

Factors to Note

Starbucks’ fiscal fourth-quarter results are likely to reflect the impact of the coronavirus pandemic. Global retail and comparable sales, and decline in store traffic might have impacted the to-be-reported quarter’s performance. The company’s three segments — Americas, International and Channel Development — are likely to have witnessed decline in sales.

The company anticipates international’s comparable store sales to decline in the range of 10% to 15% in the fiscal fourth quarter, which includes a 3% favorable VAT impact. Starbucks anticipates comparable store sales in China to be flat to -5%. The company expects global comparable sales to decline 12% and 17% in the fourth quarter and fiscal 2020, respectively. Moreover, the company anticipates Americas and U.S. comparable store sales decrease of 12% to 17% in the fourth quarter and 2020, respectively.

Margin decline has been a major concern for the company and the downtrend is likely to have persisted in the fiscal fourth-quarter. This was owing to sales deleverage and rise in costs on account of the coronavirus pandemic, primarily catastrophe wages; heightened pay programs and additional benefits in support of retail store partners; inventory write-offs; and store safety items.

The Zacks Consensus Estimate for revenues for Americas and Channel Development segments is anticipated to witness year-over-year decline of 10.2% and 16.5% to $4,176 million and $424 million, respectively.

However, robust drive-thru and deliver options are likely to have benfited the company’s performance in the to be reported quarter. Moreover, China and the Asia-Pacific region has been gaining from unit growth, rising brand awareness and increased usage of the digital/mobile/loyalty platforms. Moreover, the company’s partnership with Alibaba has been driving growth.

Starbucks Corporation Price and EPS Surprise Starbucks Corporation Price and EPS Surprise

Starbucks Corporation price-eps-surprise | Starbucks Corporation Quote

What the Zacks Model Unveils

Our proven model conclusively predicts an earnings beat for Starbucks this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that's not the case here.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Starbucks has a Zacks Rank #3 and an Earnings ESP of +0.43%.

Other Stocks Poised to Beat Earnings Estimates

Here are some other stocks from the Zacks Retail-Wholesale space that investors may consider as our model shows that these too have the right combination of elements to post an earnings beat this quarter:

Bloomin' Brands, Inc. BLMN currently has a Zacks Rank #3 and an Earnings ESP of +306.25%. You can see the complete list of today’s Zacks #1 Rank stocks here.

McDonald's Corporation MCD has a Zacks Rank #3 and an Earnings ESP of +1.08%.

Papa John's International, Inc. PZZA has a Zacks Rank #3 and an Earnings ESP of +0.52%.

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Starbucks Corporation (SBUX): Free Stock Analysis Report
McDonalds 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.

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