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Can Starbucks Turn Traffic Gains Into Sustainable Earnings Growth?
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Key Takeaways
SBUX's U.S. comps rose 7.1%, with transactions up more than 4% in the fiscal second quarter.
Starbucks raised non-GAAP EPS guidance to $2.25-$2.45 as operating momentum strengthened.
SBUX expects sales leverage and its $2B savings plan to support further margin recovery.
Starbucks Corporation (SBUX - Free Report) is showing tangible signs that its "Back to Starbucks" turnaround is translating into financial improvement. In the second quarter of fiscal 2026, the company returned to year-over-year EPS growth for the first time in more than two years, while consolidated operating margin expanded for the first time since the first quarter of fiscal 2024. Starbucks also raised its full-year outlook, now expecting global and U.S. comparable sales growth of 5% or better, up from its prior outlook of at least 3%. The company also lifted its non-GAAP EPS guidance to $2.25-$2.45 from $2.15-$2.40, pointing to greater confidence in the recovery.
The improved outlook is being supported by stronger customer demand and transaction-led comp growth. U.S. comparable sales increased 7.1%, fueled by transaction growth of more than 4%, while U.S. company-operated morning transactions were roughly back to fiscal 2022 levels. The comp recovery was supported by Green Apron Service, improved staffing, service-time execution, delivery expansion and menu innovation. Starbucks Rewards membership also reached a record 35.6 million active members, strengthening the company’s digital engagement base.
Higher transaction volumes are becoming increasingly important because they can support operating leverage as sales recover. Starbucks expects sales leverage to build over the next two quarters, while its $2 billion cost-savings program remains on track through fiscal 2028. The company also expects coffee and tariff pressures to begin easing in the back half of fiscal 2026. These factors could help offset ongoing Back to Starbucks investments and support better margin flow-through.
International profitability and the China joint venture add another layer to the earnings recovery setup. Starbucks expects the China JV structure to be margin accretive, with the transaction expected to be relatively EPS neutral in fiscal 2026. The company also expects the transition to support a more capital-efficient model in China while allowing it to continue participating in the market’s long-term growth opportunity.
Starbucks’ ability to deliver sustainable earnings growth will likely depend on whether it can convert improving traffic into consistent operating leverage and margin expansion. Customer demand is recovering, guidance has moved higher and several operating initiatives are beginning to support stronger traffic, sales leverage and margin recovery. Together, these factors likely suggest that the Back to Starbucks turnaround is gaining financial traction.
SBUX’s Price Performance, Valuation & Estimates
Shares of Starbucks have gained 16.1% in the past year against the industry’s of 5.3% fall. In the same time frame, other industry players like Dutch Bros Inc. (BROS - Free Report) have gained 5.9%, while McDonald's Corporation (MCD - Free Report) has declined 7.3%.
SBUX’s One-Year Price Performance
Image Source: Zacks Investment Research
From a valuation standpoint, SBUX trades at a forward price-to-sales (P/S) multiple of 3.01, below the industry’s average of 3.30. Conversely, industry players, such as Dutch Bros and McDonald's, have P/S multiples of 4.95 and 6.51, respectively.
SBUX’s P/S Ratio (Forward 12-Month) vs. Industry
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for SBUX’s fiscal 2026 earnings per share has increased in the past 30 days.
EPS Trend of SBUX Stock
Image Source: Zacks Investment Research
The company is likely to report strong earnings, with projections indicating an 13.2% rise in fiscal 2026. Conversely, industry players like McDonald's are likely to witness an increase of 5.4%, year over year, in 2026 earnings. Meanwhile, Dutch Bros’ 2026 earnings are likely to witness a rise of 22.4% year over year.
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Image: Bigstock
Can Starbucks Turn Traffic Gains Into Sustainable Earnings Growth?
Key Takeaways
Starbucks Corporation (SBUX - Free Report) is showing tangible signs that its "Back to Starbucks" turnaround is translating into financial improvement. In the second quarter of fiscal 2026, the company returned to year-over-year EPS growth for the first time in more than two years, while consolidated operating margin expanded for the first time since the first quarter of fiscal 2024. Starbucks also raised its full-year outlook, now expecting global and U.S. comparable sales growth of 5% or better, up from its prior outlook of at least 3%. The company also lifted its non-GAAP EPS guidance to $2.25-$2.45 from $2.15-$2.40, pointing to greater confidence in the recovery.
The improved outlook is being supported by stronger customer demand and transaction-led comp growth. U.S. comparable sales increased 7.1%, fueled by transaction growth of more than 4%, while U.S. company-operated morning transactions were roughly back to fiscal 2022 levels. The comp recovery was supported by Green Apron Service, improved staffing, service-time execution, delivery expansion and menu innovation. Starbucks Rewards membership also reached a record 35.6 million active members, strengthening the company’s digital engagement base.
Higher transaction volumes are becoming increasingly important because they can support operating leverage as sales recover. Starbucks expects sales leverage to build over the next two quarters, while its $2 billion cost-savings program remains on track through fiscal 2028. The company also expects coffee and tariff pressures to begin easing in the back half of fiscal 2026. These factors could help offset ongoing Back to Starbucks investments and support better margin flow-through.
International profitability and the China joint venture add another layer to the earnings recovery setup. Starbucks expects the China JV structure to be margin accretive, with the transaction expected to be relatively EPS neutral in fiscal 2026. The company also expects the transition to support a more capital-efficient model in China while allowing it to continue participating in the market’s long-term growth opportunity.
Starbucks’ ability to deliver sustainable earnings growth will likely depend on whether it can convert improving traffic into consistent operating leverage and margin expansion. Customer demand is recovering, guidance has moved higher and several operating initiatives are beginning to support stronger traffic, sales leverage and margin recovery. Together, these factors likely suggest that the Back to Starbucks turnaround is gaining financial traction.
SBUX’s Price Performance, Valuation & Estimates
Shares of Starbucks have gained 16.1% in the past year against the industry’s of 5.3% fall. In the same time frame, other industry players like Dutch Bros Inc. (BROS - Free Report) have gained 5.9%, while McDonald's Corporation (MCD - Free Report) has declined 7.3%.
SBUX’s One-Year Price Performance
Image Source: Zacks Investment Research
From a valuation standpoint, SBUX trades at a forward price-to-sales (P/S) multiple of 3.01, below the industry’s average of 3.30. Conversely, industry players, such as Dutch Bros and McDonald's, have P/S multiples of 4.95 and 6.51, respectively.
SBUX’s P/S Ratio (Forward 12-Month) vs. Industry
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for SBUX’s fiscal 2026 earnings per share has increased in the past 30 days.
EPS Trend of SBUX Stock
Image Source: Zacks Investment Research
The company is likely to report strong earnings, with projections indicating an 13.2% rise in fiscal 2026. Conversely, industry players like McDonald's are likely to witness an increase of 5.4%, year over year, in 2026 earnings. Meanwhile, Dutch Bros’ 2026 earnings are likely to witness a rise of 22.4% year over year.
SBUX stock currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.