What to Expect From Starbucks Earnings

This company has continually reinvented itself — not only its menu items, but its retail distribution, new partnerships, new online ordering options and social media and mobile strategies. According to Argus, Starbucks is more attuned to social issues than any comparably sized public corporation. Starbucks has been in the forefront of fair compensation initiatives for coffee field workers. And the recent pledge to pay baristas’ college costs resounded across the generations to include beleaguered boomers burdened with their offspring’s college debt.

Recently Starbucks conducted a two-for-one stock split. Shares began trading on a split-adjusted basis on April 9.

Stock splits are often called a gimmick, but think about this. If you bought 100 shares at the Starbucks initial public offering and forgot that you owned them, after six splits that 100 shares would have turned out to be 6,400 shares. Not bad, even at the current price.

On a split-adjusted basis, the company’s previously communicated earnings guidance equates to a range of $0.32 to $0.33 per share for the fiscal second quarter, and a range of $1.55 to $1.57 per share for the full 2015 fiscal year. Due to this adjustment, the company is updating earnings targets.

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In the week ahead of earnings Starbucks received a few analyst calls:

• Barclays had an Equal Weight rating with a price target of $45, implying a slight downside of 7.4%.
• Guggenheim initiated coverage with a Buy rating and a price target of $56, implying upside of 15.3%.
• BMO Capital Markets initiated coverage with an Outperform rating and a price target of $56.
• Cowen initiated coverage with an Outperform rating and a price target of $56.
• RBC Capital reiterated an Outperform rating with a price target of $50.

Overall, it seems like most of the recent calls are positive on Starbucks. The stock has a consensus analyst price target of $50.94, which only implies upside of 4.9%.

Shares of Starbucks were up 0.7% at $48.67 in Thursday morning trading, in a 52-week trading range of $34.57 to $49.60. The stock currently trades at nearly 31 times 2015 earnings.