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Starbucks (SBUX) Gains As Market Dips: What You Should Know

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Starbucks (SBUX - Free Report) closed at $111.14 in the latest trading session, marking a +0.63% move from the prior day. The stock outpaced the S&P 500's daily loss of 0.1%. At the same time, the Dow lost 0.47%, and the tech-heavy Nasdaq lost 0.47%.

Heading into today, shares of the coffee chain had lost 5% over the past month, lagging the Retail-Wholesale sector's loss of 0.65% and the S&P 500's gain of 3.67% in that time.

Investors will be hoping for strength from Starbucks as it approaches its next earnings release. In that report, analysts expect Starbucks to post earnings of $0.80 per share. This would mark year-over-year growth of 31.15%. Meanwhile, our latest consensus estimate is calling for revenue of $7.99 billion, up 18.44% from the prior-year quarter.

For the full year, our Zacks Consensus Estimates are projecting earnings of $3.45 per share and revenue of $32.68 billion, which would represent changes of +6.48% and +12.45%, respectively, from the prior year.

It is also important to note the recent changes to analyst estimates for Starbucks. These revisions help to show the ever-changing nature of near-term business trends. As such, positive estimate revisions reflect analyst optimism about the company's business and profitability.

Our research shows that these estimate changes are directly correlated with near-term stock prices. We developed the Zacks Rank to capitalize on this phenomenon. Our system takes these estimate changes into account and delivers a clear, actionable rating model.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. The Zacks Consensus EPS estimate has moved 0.06% higher within the past month. Starbucks is holding a Zacks Rank of #3 (Hold) right now.

In terms of valuation, Starbucks is currently trading at a Forward P/E ratio of 32.04. For comparison, its industry has an average Forward P/E of 21.7, which means Starbucks is trading at a premium to the group.

Also, we should mention that SBUX has a PEG ratio of 1.62. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. Retail - Restaurants stocks are, on average, holding a PEG ratio of 1.94 based on yesterday's closing prices.

The Retail - Restaurants industry is part of the Retail-Wholesale sector. This industry currently has a Zacks Industry Rank of 229, which puts it in the bottom 11% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

Be sure to follow all of these stock-moving metrics, and many more, on Zacks.com.


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