Consumer habits, return-to-office and an activist stake are likely to be key topics for investors when coffee retailer Starbucks Corporation SBUX reports third-quarter financial results Tuesday after market close.
Earnings Estimates: Analysts expect Starbucks to report third-quarter revenue of $9.24 billion, according to data from Benzinga Pro.
The company reported third-quarter revenue of $9.17 billion in the previous fiscal year. Starbucks has missed analysts' revenue estimates in three of the last five quarters, including missing the last two straight quarters.
Analysts expect the company to report third-quarter earnings per share of 93 cents, compared to $1.00 reported in last year's third quarter. The company has beaten analysts' estimates in three of the last five quarters, but missed estimates in two straight quarters.
What Experts Are Saying: Starbucks was highlighted in a weekly newsletter from Freedom Capital Markets Chief Global Strategist Jay Woods to start the trading week.
The strategist said McDonald's and Starbucks have had to rethink how they can "draw customers back to their franchises."
"Their sharp price increases in the post-pandemic world saw their loyal fan base pullback and in some cases look elsewhere," Woods said of Starbucks.
Woods said that there have been calls for Starbucks to replace its CEO and a new activist stake by Elliott Management could accelerate changes.
"Expect Elliott to get more vocal and shake things up if they see results that don't improve share performance."
Data from Placer.ai points to Starbucks getting a boost from the "slow-but-sure return-to-office." The company said that Starbucks is seeing increases in office foot traffic in the past year, especially in big cities like New York and Miami.
In big cities, office visits for Starbucks are back to 80% what they were pre-pandemic. The report said that 18.6% of Starbucks visitors went to their workplace after grabbing coffee. In 2024, the figure has jumped to 21.0%.
Starbucks is also seeing an increase in visits at its locations lasting less than 10 minutes from the 7 a.m. to 10 a.m. time slot, indicating that many workers are grabbing their coffee to go.
Here's a look at recent analyst ratings on Starbucks and their price targets:
- Citigroup: Maintained Neutral rating, lowered price target from $85 to $80
- BMO Capital: Maintained Outperform rating, lowered price target from $120 to $100
- TD Cowen: Reiterated Hold rating, reiterated price target of $81
- Wedbush: Maintained Neutral rating, lowered price target from $81 to $77
- Deutsche Bank: Maintained Hold rating, lowered price target from $89 to $85
- Evercore ISI Group: Downgraded shares from Outperform to In-Line, lowered price target from $92 to $80
- Morgan Stanley: Maintained Overweight rating, lowered price target from $104 to $98
- JPMorgan: Maintained Overweight rating, lowered price target from $92 to $90
Key Items to Watch: As mentioned by Woods, the stake by Elliott Management is one that analysts and investors will be following. While Starbucks likely won't comment on the stake, it could look to highlight many of its growth items and future plans to drive shareholder value during the quarterly results and conference call.
In the second quarter, Starbucks reported year-over-year declines for comparable store sales globally and across key regions like North America and China. The declines came with a 2% increase in average ticket.
"In a highly challenged environment, this quarter's results do not reflect the power of our brand, our capabilities or the opportunities ahead," Starbucks CEO Laxman Narasimhan said.
Narasimhan said at the time that Starbucks has a plan to execute for the opportunities ahead. With pressure from Elliott, expect Starbucks to share more
SBUX Price Action: Starbucks shares closed 1.5% higher at $75.20 on Monday, versus a 52-week trading range of $71.55 to $107.66. Starbucks stock is down 23% year-to-date in 2024.
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