This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Starbucks Earnings Preview: What Wall Street Is Saying

NEW YORK (TheStreet) -- Fiscal third-quarter earnings at Starbucks (SBUX) are expected by analysts to rise 20% to 66 cents a share on revenue growth of 11% to $4.14 billion. As the coffee company expands its food as well as cold drink offerings, quarterly same-store sales are forecast to rise 5.1%, according to Consensus Metrix.

Starbucks is opening new stores, with a heavy focus on international expansion. Last week it opened its first store in Colombia. Digital and mobile technology also is a strong focus for the coffee chain. CEO Howard Schultz ceded his daily operational responsibilities earlier this year to focus on "Starbucks mission, growth initiatives and the convergence and integration of our retail and e-commerce, digital, card and mobile assets around the world," he said in January.

The company forecast in April that it expected third-quarter profit to range between 64 cents and 66 cents a share.

Will Starbucks (SBUX) Stock Be Affected By China Meat Scandal?

Why Starbucks' Digital Platform Will Be the Model for Retailers

Starbucks' CEO Howard Schultz Is One of Jim Cramer's Bankable CEOs

Starbucks shares have risen 1.7% this year. Shares of Dunkin' Brands (DNKN) (which also reports quarterly results on Thursday), are down 7.3% while McDonald's (MCD) shares are flat.  Here's what Wall Street will be watching when Starbucks reports earnings after Thursday's closing bell.

Coffee Prices

Nicole Miller Regan, Piper Jaffray (Overweight; $90 PT)

Coffee prices remain elevated, but moved lower sequentially in June. We note that coffee prices are expected to move higher over the near-term and thus likely remain in the mainstream headlines. Looking forward, we expect inflation to continue in CY14 as coffee prices move higher from multi-year lows set at the end of last year. That said and despite the likelihood for inflation, we note that SBUX has its coffee needs locked for the remainder of this year at favorable prices and is already locked for ~40% of 2015 at roughly flat pricing. Thus, while inflation will eventually work its way into numbers we believe the company remains well-positioned to weather near-term inflation given its already established contracts and lever its industry-leading brand equity vis-a-vis potential menu pricing power.

Food Sales

Brian Bittner, Oppeneheimer (Outperform)

SBUX sales/unit are still relatively "low" at $1.3M (vs. MCD at $2.5M), mostly because food is only 20% of SBUX sales. But the product pipeline is one of the best in company's history, comparisons now ease and the competitive moat remains very deep. The Street models comps decelerating to +5% (vs. +7% average since 2010) over the next six quarters, despite these favorable dynamics. Foodadded 1-2% to comps prior to roll-out of La Boulange bakery products. This fresh line-up is now the largest contributor to the comp, with catalysts for an acceleration in the form of a new breakfast sandwich platform (debuted in March and driving 50% increase in breakfast sandwich sales) and full lunch roll-out in F15 (Exhibit 2 below from a test location in NYC).

Consumer Packaged Goods

Nick Setyan, Wedbush Securities (Outperform; $90 PT)

[The] CPG segment [is] poised for acceleration, in our opinion. Our weekly grocery price checks indicate Starbucks is poised to benefit from the most favorable relative pricing vs. competitors since our checks started in the summer of 2012. Starbucks not only lapped a price decrease in May, but we've seen competitors increase prices recently. Our analysis of weekly coffee check price data and IRI grocery data (which have shown 95% correlation historically), indicate SBUX is best positioned among competitors to increase prices without losing share, and also stands to benefit most from competitors' price increases.

-- Written by Laurie Kulikowski in New York.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,279.74 +13.75 0.08%
S&P 500 2,010.40 -0.96 -0.05%
NASDAQ 4,579.7890 -13.6380 -0.30%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs