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Starbucks (SBUX) Stock Up on Robust Plans for 2023-2025
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Starbucks Corporation (SBUX - Free Report) is very optimistic about its growth opportunities in the next three years. During the company's 2022 investor day meeting, it unveiled a business reinvention plan. Following the news, the company’s shares increased 2.5% in the after-hours trading session on Sep 13. Notably, the company’s shares have gained 18.4% in the past three months compared with the industry’s rally of 15.2%.
The company’s targeted investments in partners, customers and stores are likely to be the major growth drivers in the long run. This will help the company to increase operating margin and drive high-teens non-GAAP EPS growth annually through fiscal 2025.
Guidance for Fiscal 2023 to 2025
For fiscal 2023 to 2025, Starbucks anticipates global and U.S. comparable store sales growth between 7% and 9% year over year. The figure is above the previous range of 4-5%.
The company’s performance in China was severely impacted by the coronavirus pandemic. However, in 2023 and 2024, it is likely to witness robust growth in China and growth is likely to normalize in the range of 4-6% in fiscal 2025, up from the prior estimate of 2-4%.
Starbucks is focusing on store expansion efforts to drive growth. For fiscal 2023 to 2025, it expects its global store portfolio to increase approximately 7% annually, up from the prior estimate of 6%. In the same period, the company is likely to witness net new store growth of 3-4% annually in the U.S., up from the prior estimate of nearly 3%.
In China, the company is likely to witness net unit growth of roughly 13% annually. By the end of 2025, the company’s global store count is likely to reach 45,000 and by 2030 it is projected to be 55,000. In China, the company expects its store count to increase to 9,000 by 2025, up from the current store count of 5,700.
For fiscal 2023 to 2025, the company anticipates global revenue to increase in the range of 10-12% annually. The figure is higher than the company’s prior range of 8-10%. Starbucks anticipates robust margin expansion in fiscal 2023, 2024 and 2025. It expects non-GAAP earnings per share to grow between 15% and 20% annually through 2025, up from the prior range of 10-12%.
The company is also planning to recommence its share repurchase program. In the next three years, it expects to reward investors with approximately $20 billion in the form of dividends and share repurchases.
Image Source: Zacks Investment Research
Investment to Revamp Stores & Other Efforts
To introduce purpose-built store concepts, the company will invest an incremental $450 million in the current U.S. store base in fiscal 2023. The company will continue to invest in fiscal 2024 and 2025.
This Zacks Rank #3 (Hold) company is also focusing on robust digitization to drive growth. To make Starbucks available to all customers, the company is focusing on expanding its Starbucks Delivers program in the U.S. with a new partner, DoorDash.
Tecnoglass currently sports a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of 24.4%, on average. Shares of the company have increased 3.6% in the past three months. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for TGLS’s 2022 sales and earnings per share (EPS) suggests growth of 28.2% and 47.7%, respectively, from the year-ago period’s levels.
Cracker Barrel currently carries a Zacks Rank #2 (Buy). It has a long-term earnings growth of 6.9%. Shares of the company have decreased 21.3% in the past year.
The Zacks Consensus Estimate for CBRL’s 2022 sales and EPS suggests growth of 16.3% and 15.4%, respectively, from the year-ago period’s levels.
Arcos Dorados carries a Zacks Rank #2. It has a long-term earnings growth of 34.4%. Shares of the company have risen 36.8% in the past year.
The Zacks Consensus Estimate for ARCO’s 2022 sales and EPS suggests growth of 27.1% and 104.2%, respectively, from the year-ago period’s levels.
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Starbucks (SBUX) Stock Up on Robust Plans for 2023-2025
Starbucks Corporation (SBUX - Free Report) is very optimistic about its growth opportunities in the next three years. During the company's 2022 investor day meeting, it unveiled a business reinvention plan. Following the news, the company’s shares increased 2.5% in the after-hours trading session on Sep 13. Notably, the company’s shares have gained 18.4% in the past three months compared with the industry’s rally of 15.2%.
The company’s targeted investments in partners, customers and stores are likely to be the major growth drivers in the long run. This will help the company to increase operating margin and drive high-teens non-GAAP EPS growth annually through fiscal 2025.
Guidance for Fiscal 2023 to 2025
For fiscal 2023 to 2025, Starbucks anticipates global and U.S. comparable store sales growth between 7% and 9% year over year. The figure is above the previous range of 4-5%.
The company’s performance in China was severely impacted by the coronavirus pandemic. However, in 2023 and 2024, it is likely to witness robust growth in China and growth is likely to normalize in the range of 4-6% in fiscal 2025, up from the prior estimate of 2-4%.
Starbucks is focusing on store expansion efforts to drive growth. For fiscal 2023 to 2025, it expects its global store portfolio to increase approximately 7% annually, up from the prior estimate of 6%. In the same period, the company is likely to witness net new store growth of 3-4% annually in the U.S., up from the prior estimate of nearly 3%.
In China, the company is likely to witness net unit growth of roughly 13% annually. By the end of 2025, the company’s global store count is likely to reach 45,000 and by 2030 it is projected to be 55,000. In China, the company expects its store count to increase to 9,000 by 2025, up from the current store count of 5,700.
For fiscal 2023 to 2025, the company anticipates global revenue to increase in the range of 10-12% annually. The figure is higher than the company’s prior range of 8-10%. Starbucks anticipates robust margin expansion in fiscal 2023, 2024 and 2025. It expects non-GAAP earnings per share to grow between 15% and 20% annually through 2025, up from the prior range of 10-12%.
The company is also planning to recommence its share repurchase program. In the next three years, it expects to reward investors with approximately $20 billion in the form of dividends and share repurchases.
Image Source: Zacks Investment Research
Investment to Revamp Stores & Other Efforts
To introduce purpose-built store concepts, the company will invest an incremental $450 million in the current U.S. store base in fiscal 2023. The company will continue to invest in fiscal 2024 and 2025.
This Zacks Rank #3 (Hold) company is also focusing on robust digitization to drive growth. To make Starbucks available to all customers, the company is focusing on expanding its Starbucks Delivers program in the U.S. with a new partner, DoorDash.
Key Picks
Some better-ranked stocks in the Zacks Retail-Wholesale sector are Tecnoglass Inc. (TGLS - Free Report) , Cracker Barrel Old Country Store, Inc. (CBRL - Free Report) and Arcos Dorados Holdings Inc. (ARCO - Free Report) .
Tecnoglass currently sports a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of 24.4%, on average. Shares of the company have increased 3.6% in the past three months. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for TGLS’s 2022 sales and earnings per share (EPS) suggests growth of 28.2% and 47.7%, respectively, from the year-ago period’s levels.
Cracker Barrel currently carries a Zacks Rank #2 (Buy). It has a long-term earnings growth of 6.9%. Shares of the company have decreased 21.3% in the past year.
The Zacks Consensus Estimate for CBRL’s 2022 sales and EPS suggests growth of 16.3% and 15.4%, respectively, from the year-ago period’s levels.
Arcos Dorados carries a Zacks Rank #2. It has a long-term earnings growth of 34.4%. Shares of the company have risen 36.8% in the past year.
The Zacks Consensus Estimate for ARCO’s 2022 sales and EPS suggests growth of 27.1% and 104.2%, respectively, from the year-ago period’s levels.