Starbucks' Outlook Gives Analysts Confidence, Despite U.S. Comp Miss

Wedbush expressed confidence in Starbucks Corporation SBUX’s 2017 outlook despite the coffee giant reporting sluggish domestic comps for its latest quarter.

Starbucks reported quarterly adj. EPS of $0.52 in line with consensus. But, it reported comp growth of 3 percent, lower than 3.9 percent consensus. The company attributed softness in transactions to throughput challenges related to increased adoption of mobile order and pay.

That said, Starbucks reiterated guidance of 15–16 percent EPS growth ($2.12–2.14) in FY 2017 on MSD comp growth.

“We believe enough flexibility exists on the cost side, particularly around partner and technology investments, to meet or exceed mid-teens EPS growth in FY17 and beyond even on a lower comp trajectory,” analyst Nick Setyan wrote in a note.

Rating And Outlook

Setyan maintains his Outperform rating and $65 price target on the shares, as he expects comps to ramp in the second half of 2017 on throughput initiatives, continued menu innovation and incremental digital initiatives.

“Expect Americas comp momentum, accelerating CAP unit growth, a successful EMEA turnaround, and multiple CPG and emerging market opportunities to drive consistent mid-to-high teens annual EPS growth,” Setyan added.

Shares of Starbucks closed Thursday’s trading at $58.46. In the pre-market hours Friday, the stock was seen down 3.99 percent to $56.13.