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Why Starbucks Shares Are Rising After Earnings

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Starbucks shares gained after beating on earnings estimates and issuing strong guidance, giving investors confidence in the narrative that the company indeed began a sustainable revenue and earnings rebound sometime during the reported quarter. 

Here were Starbucks'  (SBUX) - Get Starbucks Corporation Report results against Wall Street expectations: 

  • Revenue: $4.2B v. $4.06B (actual: -38% year-over-year)
  • Same-store-sales: -40% v. -42% 
  • Americas Revenue: $2.8B v. $2.78B (-40%)
  • Operating Loss: $703M v. $739M 
  • Adjusted Loss Per Share: 46 cents v. 59 cents 

The poor results came as the quarter was expected to be the worst of the pandemic so far. 

"We are pleased to share that the vast majority of Starbucks stores around the world have reopened and our global business is steadily recovering, demonstrating the relevance of the Starbucks brand and the trust we have built with our customers," said Starbucks.

"As we continue to drive the recovery, we are also building resilience for the future by accelerating the transformation of our business in ways that will elevate the customer and partner experience and drive long-term growth. We firmly believe that we are well positioned to regain the positive business momentum we had before the pandemic began and look forward to reigniting our 'Growth at Scale’ agenda."

While most companies are not issuing guidance due to lack of visibility in the face of the virus, Starbucks did issue guidance. 

The company said it expects to see same-store-sales for the current quarter decline 12%, better than analysts' estimates of 15%. Adjusted EPS is expected at roughly 25 cents, with a large range in either direction, against estimates of 27 cents. 

The stock, down 10% since June 8, but trading at a rich multiple on "normalized" 2021 earnings, rose 3.2% to $77 a share in post-market trading. The better-than-expected results and and guidance provides clear proof that the company, excluding more health headwinds, is on track to moving back to pre-virus levels or revenue and earnings and to previous growth rates. 

Ed Ponsi, TheStreet's founder of Ponsi Charts and Managing Director of Barchetta Capital Management weighed in: "If you look at the chart, there's a lot of support at $70.65. If you buy the stock, you can do it with very little risk." 

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