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Here's How Starbucks (SBUX) Looks Just Ahead of Q1 Earnings

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Starbucks Corporation (SBUX - Free Report) is scheduled to report first-quarter fiscal 2021 results on Jan 26, 2021, after the closing bell. In the last reported quarter, the company delivered an earnings surprise of 54.6%.

How Are Estimates Placed?

The Zacks Consensus Estimate for fiscal first-quarter earnings is pegged at 55 cents per share, which indicates a decline of 30.4% from earnings of 79 cents reported in the year-ago quarter. For revenues, the consensus mark is pegged at $6,876 million, which suggests a decline of 3.1% from the year-ago quarter’s figure.

Let's take a look at how things have shaped up in the quarter.

Starbucks Corporation Price and EPS Surprise


Starbucks Corporation Price and EPS Surprise

Starbucks Corporation price-eps-surprise | Starbucks Corporation Quote


Factors at Play

The coronavirus pandemic is likely to have materially affected Starbucks’ fiscal first-quarter performance. Although the company stated that it is witnessing recovery in operations, fiscal first quarter top-line is likely to decline year over year due to store closures, reduced operating hours, dismal customer traffic and heightened competition within the coffee segment. Notably, dismal sales in the company’s three segments — Americas, International and Channel Development — are likely to have negatively impacted the company’s results in the first quarter.

The Zacks Consensus Estimate for revenues for Americas and Channel Development segments is anticipated to witness year-over-year decline of 2.3% and 18.4% to $4,896 million and $404 million, respectively.

Moreover, the company’s margins in fourth-quarter fiscal 2020 were impacted by sales deleverage and rise in costs due to the coronavirus pandemic, mostly catastrophe wages as well as heightened pay programs and additional benefits in support of retail store partners, inventory write-offs and store safety items. The downtrend is likely to continue in first-quarter fiscal 2021.

However, robust drive-thru and deliver options are likely to have benefited the company’s performance in the to-be-reported quarter. Moreover, China and the Asia-Pacific regions have been gaining from unit growth, rising brand awareness and increased usage of the digital/mobile/loyalty platforms. Comps in China are anticipated to fully recover in the quarter under review.

What Our Model Says

Our proven model does not conclusively predict an earnings beat for Starbucks this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that's not the case here.

Earnings ESP: Starbucks has an Earnings ESP of -1.82%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company has a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks Poised to Beat Earnings Estimates

Here are some other stocks from the Zacks Retail-Wholesale space that investors may consider as our model shows that these too have the right combination of elements to post an earnings beat this quarter:

Brinker International, Inc. (EAT - Free Report) currently sports a Zacks Rank #3 and has an Earnings ESP of +30.25%.

McDonald's Corporation (MCD - Free Report) carries a Zacks Rank #3 and has an Earnings ESP of +1.06%.

Papa John's International, Inc. (PZZA - Free Report) carries a Zacks Rank #3 and has an Earnings ESP of +1.48%.

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