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Starbucks Corporation (SBUX - Analyst Report) is set to report second-quarter fiscal 2014 results on Apr 24, before the market opens. Last quarter, the company delivered a positive earnings surprise of 2.90%. Let’s see how things are shaping up for this announcement.

Factors to Consider This Quarter

In our view, second-quarter customer traffic could be hurt by a tough winter in January and February which kept customers home. Last quarter, Starbucks’ U.S. sales slowed due to lower in-store foot traffic as more consumers opted for online shopping during the holiday season.

This trend could affect sales again in this quarter. Moreover, a shift in the Easter timing could hurt comps. Margin gains due to lower coffee costs could be partially offset by the pricing actions for packaged coffee.

However, Starbucks’ earnings are expected to improve in the second half. In fact, food/beverage innovations, digital/mobile/loyalty initiatives, single-serve products, La Boulange bakery items, handcrafted cold carbonated beverages, Evolution Fresh juices and Teavana tea could emerge as meaningful top-line growth drivers in fiscal 2014.

Earnings Whisper?

Our proven model does not conclusively show that Starbucks is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP  and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here, as you will see below.

Negative Zacks ESP:  The Earnings ESP is -1.79%.

Zacks Rank #4 (Sell): We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Other stocks in the retail/restaurants sector that have both a positive Earnings ESP and a favorable Zacks Rank are:

Arcos Dorados Holdings Inc. Cla (ARCO - Snapshot Report), with Earnings ESP of +25.0% and a Zacks Rank #2 (Buy).

Ruby Tuesday, Inc. (RT - Snapshot Report) has an Earnings ESP of +11.11% and a Zacks Rank #3.

The Cheesecake Factory Inc. (CAKE - Analyst Report), with Earnings ESP of +2.04% and a Zacks Rank #3.

Read the Full Research Report on SBUX
Read the Full Research Report on ARCO
Read the Full Research Report on CAKE
Read the Full Research Report on RT

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