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While major indices gained sharply in the last trading session, Starbucks Corporation (SBUX - Free Report) witnessed a decline of 0.7%. Starbucks warned that its earnings in fiscal 2020 are likely to be below its long-term growth target of minimum of 10%.
Notably, the company lowered its earnings guidance for fiscal 2020 due to “pull forward” of nearly $2 billion of the share repurchase program. Starbucks had initially expected to repurchase significant portion of its $2-billion share repurchase program in 2020. However, majority of its share was repurchased in 2019 for tax reasons. The Zacks Consensus Estimate for fiscal 2020 earnings is currently pegged at $3.14, suggesting 11% growth from year-ago quarter reported figure.
Starbucks’ chief financial officer Patrick Grismer stated that tax benefit recorded in fiscal 2019 is likely to be a "significant headwind" to profit in fiscal 2020.
Long-term View Intact
Grismer stated that the company is “firing on all cylinders from an operating performance perspective with the focus and discipline necessary to drive growth at scale for a company like Starbucks, and our long-term double-digit EPS growth model is fully intact.”
Starbucks’ solid execution of several initiatives in the United States and China along with best-in-class loyalty programs and digital offerings are expected to drive profits. Of late, the company’s both the Americas and China-Asia-Pacific segments have been performing exceptionally well. Moreover, store openings, enhanced customer experience and digitalization bode well for the company.
China Asia Pacific (CAP) has now become the fastest-growing segment. Improving customer experience via innovative new store designs, up-leveling product offerings and margin expansion through process and supply chain efficiencies are driving CAP performance. China has delivered comps growth of 1%, 3% and 6% in the first, second and third of fiscal 2019, respectively. Management believes that China and the Asia-Pacific region will drive much more meaningful business over the next five years.
This Zacks Rank #2 (Buy) company’s best-in-class loyalty program is an added positive. In the United States, Starbucks’ membership increased 11% year over year under the My Starbucks Rewards (MSR) program in fiscal 2017 and rose 15% to 15.3 million active members in fiscal 2018. The momentum continued in third-quarter fiscal 2019 as well, with the membership growing 14% year over year to 17.2 million active members.
Year to date, Starbucks has gained 49.2%, outperforming the industry’s 30.4% rally.
Dave & Buster's Entertainment, Wendy's and Shake Shack have an impressive long-term earnings growth rate of 14.8%, 14.3% and 22.5%, respectively.
It’s Illegal in 42 States, But Investors Will Make Billions Legally
In addition to the companies you read about above, today you get details on the newly-legalized industry that’s tapping into a “habit” that Americans spend an estimated $150 billion on every year.
That’s twice as much as they spend on marijuana, legally or otherwise.
Zacks special report revealing how investors can profit from this new opportunity. As more states legalize this activity, the industry could expand by as much as 15X. Zacks’ has just released a Special
Report revealing 5 top stocks to watch in this space.
Image: Bigstock
Starbucks Trims 2020 Earnings Forecast, Long-term View Intact
While major indices gained sharply in the last trading session, Starbucks Corporation (SBUX - Free Report) witnessed a decline of 0.7%. Starbucks warned that its earnings in fiscal 2020 are likely to be below its long-term growth target of minimum of 10%.
Notably, the company lowered its earnings guidance for fiscal 2020 due to “pull forward” of nearly $2 billion of the share repurchase program. Starbucks had initially expected to repurchase significant portion of its $2-billion share repurchase program in 2020. However, majority of its share was repurchased in 2019 for tax reasons. The Zacks Consensus Estimate for fiscal 2020 earnings is currently pegged at $3.14, suggesting 11% growth from year-ago quarter reported figure.
Starbucks’ chief financial officer Patrick Grismer stated that tax benefit recorded in fiscal 2019 is likely to be a "significant headwind" to profit in fiscal 2020.
Long-term View Intact
Grismer stated that the company is “firing on all cylinders from an operating performance perspective with the focus and discipline necessary to drive growth at scale for a company like Starbucks, and our long-term double-digit EPS growth model is fully intact.”
Starbucks’ solid execution of several initiatives in the United States and China along with best-in-class loyalty programs and digital offerings are expected to drive profits. Of late, the company’s both the Americas and China-Asia-Pacific segments have been performing exceptionally well. Moreover, store openings, enhanced customer experience and digitalization bode well for the company.
China Asia Pacific (CAP) has now become the fastest-growing segment. Improving customer experience via innovative new store designs, up-leveling product offerings and margin expansion through process and supply chain efficiencies are driving CAP performance. China has delivered comps growth of 1%, 3% and 6% in the first, second and third of fiscal 2019, respectively. Management believes that China and the Asia-Pacific region will drive much more meaningful business over the next five years.
This Zacks Rank #2 (Buy) company’s best-in-class loyalty program is an added positive. In the United States, Starbucks’ membership increased 11% year over year under the My Starbucks Rewards (MSR) program in fiscal 2017 and rose 15% to 15.3 million active members in fiscal 2018. The momentum continued in third-quarter fiscal 2019 as well, with the membership growing 14% year over year to 17.2 million active members.
Year to date, Starbucks has gained 49.2%, outperforming the industry’s 30.4% rally.
Other Key Picks
Some other top-ranked stocks, which warrant a look in the same space, include Dave & Buster's Entertainment, Inc. (PLAY - Free Report) , The Wendy's Company (WEN - Free Report) and Shake Shack Inc. (SHAK - Free Report) , each carrying a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Dave & Buster's Entertainment, Wendy's and Shake Shack have an impressive long-term earnings growth rate of 14.8%, 14.3% and 22.5%, respectively.
It’s Illegal in 42 States, But Investors Will Make Billions Legally
In addition to the companies you read about above, today you get details on the newly-legalized industry that’s tapping into a “habit” that Americans spend an estimated $150 billion on every year.
That’s twice as much as they spend on marijuana, legally or otherwise.
Zacks special report revealing how investors can profit from this new opportunity. As more states legalize this activity, the industry could expand by as much as 15X. Zacks’ has just released a Special
Report revealing 5 top stocks to watch in this space.
See these 5 “sin stocks” now>>