Investors Should Be Watching Starbucks' U.S. Comps

Goldman Sachs said investors should be watching the U.S. comps of Starbucks Corporation SBUX when the company reports its quarterly results on July 21.

Investors are focused on the debate of a 5 percent or 6 percent comp in the US. On the back of a moderately slower industry outlook, Goldman sees 5 percent comp (down 1 percent on a two-year stack) versus consensus closer to 6 percent.

For the third quarter, Goldman expects earnings of $0.48 a share, below consensus' view of $0.49 a share.

"We view risk-reward as favorable, with shares likely to see support below $55 on a 5% US comp. We believe a 6% comp could disprove concerns about an optically flat traffic number, re-highlight the strength of the growth story, and help move the shares into the $60s in the near term," analyst Karen Holthouse wrote in a note.

That said, the analyst's key concern heading into results is commentary on recent wage increases in the US – price remains a potential offset, but management commentary could raise concerns about 2017 guidance at the low end of the long-term range of 15-20 percent.

Starbucks recently announced a round of partner investments, which they expect will increase compensation by about 10 percent at the store level. Holthouse said this has the potential to be a 1-2 percent drag on store margins or a 5 percent drag on 2017 operating profit growth.

Within the comp algorithm, the analyst sees the potential for another positive update on food sales, with data from its latest survey of 2000 consumers suggesting a lunch bundle promotion did translate into increased interest.

Holthouse has a price target of $73 on the stock.