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Starbucks wins over Dunkin' Brands ahead of earnings: Wedbush

Investors brewing over which coffee retailer to buy may get some clarity when both Starbucks (SBUX) and Dunkin’ Brands (DNKN) report quarterly earnings on Thursday.

The Street is expecting Dunkin’ Brands to report $0.48 a share when it reports before bell. Revenue is expected to be $203.6 million for the quarter, compared to $190.9 million a year earlier.

The expectation for Starbucks is $0.41 a share, when they post after the bell. The Seattle-based company is expected to report revenue of nearly $4.9 billion, compared to $4.2 billion a year earlier.

It’s no contest on which stock to own according to Nick Setyan, who covers both stocks at Wedbush Securities. The coffee market “space is growing but Starbucks is definitely taking share from Dunkin',” he said.

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“Dunkin’ has been focusing a lot more in lunch and dinner day parts in the past year or so and it hasn’t worked out so well,” said Setyan. The analyst also said Dunkin’s “breakfast…has been losing market share.” Setyan rates Dunkin’ Brands a “neutral” with the price target set at $54 a share.

Starbucks is rated an “outperform” by Setyan with its price target set at $64 a share. The analyst is bullish on the stock and thinks “all the drivers are in place for continued comp momentum in the mid to high single digit range.”

Other reasons Starbucks is favored by the analyst are “they just took pricing again with no indication of pushback from customers. Coffee prices are down 30% this year.” He added, “I can’t think of any other restaurant that I can say all the way up to 2018, 2019, 20% plus EPS [earnings per share] growth, year in, year out is set.”

When asked where he gets his morning coffee, Setyan replied, “definitely Starbuck.”

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