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ETFs to Gain From Starbucks' Solid Q3 Earnings Report

Sweta Jaiswal, FRM

Starbucks Corporation SBUX released third-quarter fiscal 2019 results after market close on Jul 25, with earnings and revenues surpassing estimates. Following the earnings release, Starbucks gained 6.6% in after-hour trading.

Earnings in Focus

Starbucks reported adjusted earnings of 78 cents per share, beating the Zacks Consensus Estimate by 8.3% and improving 25.8% from the year-ago quarter. Revenues grew nearly 8.1% year over year to $6.82 billion, beating the Zacks Consensus Estimate by 2.1%.

Strength in the Americas and China-Asia-Pacific segments and store openings drove the company’s performance in the reported quarter. The company’s efforts to deliver enhanced customer experience, launch beverages and broaden digital customer relationships have been driving results. 

Starbucks has updated its guidance for fiscal 2019 earnings. Non-GAAP EPS is expected in the range of $2.80 to $2.82 against the previous guidance of $2.75 to $2.79.

Business Update

Starbucks opened 442 net stores worldwide, taking the total tally to 30,626. Global store growth was 7% on a year-over-year basis. The company stated that around one-third of the net new store opening was in China while 48% was in other global markets.

Moreover, global comparable store sales increased 6% driven by comp growth in the United States, China and Asia Pacific. Global comps were driven by a 3% rise in average ticket.

The company’s Active Starbucks StarbucksRewards loyalty program expanded to 17.2 million active members in the United States, up 14% on a year-over-year basis.

ETFs in Focus

Investors might want to take a look at some consumer discretionary ETFs which have notable exposure to Starbucks and can cash in on the coffee giant’s stellar earnings results (see: all the Consumer Discretionary ETFs here):

Invesco Dynamic Leisure and Entertainment ETF (PEJ) — 5.58% exposure

The fund tracks the Dynamic Leisure and Entertainment Intellidex Index, which comprises stocks of U.S. leisure and entertainment companies. The index is designed to provide capital appreciation by thoroughly evaluating companies based on a variety of investment merit criteria, including fundamental growth, stock valuation, investment timeliness and risk factors. The fund comprises 30 holdings with Starbucks occupying the highest spot. Its AUM is $59.9 million and expense ratio is 0.63%.

The fund carries a Zacks ETF Rank #3 (Hold) with a High risk outlook (read: 5 ETFs to Profit From July Fourth Celebrations).

Invesco Dynamic Food & Beverage ETF PBJ — 5.62% exposure

The fund tracks the Dynamic Food & Beverage Intellidex Index comprising stocks of 30 U.S. food and beverage companies. These are companies that are principally engaged in the manufacture, sale or distribution of food and beverage products, agricultural products and products related to the development of new food technologies. The fund comprises 30 holdings with Starbucks occupying the first spot. Its AUM is $71.9 million and expense ratio is 0.63%. The fund carries a Zacks ETF Rank #4 (Sell) with a Medium risk outlook (read: June Retail Sales Beat Forecast: ETF & Stock Winners).

iShares Evolved U.S. Consumer Staples ETF IECS — 4.71% exposure

It is an actively managed fund which employs data science techniques to identify companies with exposure to the consumer staples sector. The fund comprises 123 holdings with Starbucks occupying the sixth spot. Its AUM is $4.1 million and expense ratio is 0.18% (read: Markets Jump as Fears Ease: 4 Sector ETFs at New Highs).

Consumer Discretionary Select Sector SPDR Fund XLY — 4.77% exposure

The fund tracks the Consumer Discretionary Select Sector Index and comprises 63 holdings. Starbucks sits at the fourth spot. The fund’s AUM is $14.53 billion and expense ratio is 0.13%. It carries a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: Antitrust Probe Likely to Hit These Tech ETFs).

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Invesco Dynamic Food & Beverage ETF (PBJ): ETF Research Reports
 
Consumer Discretionary Select Sector SPDR Fund (XLY): ETF Research Reports
 
Starbucks Corporation (SBUX) : Free Stock Analysis Report
 
iShares Evolved U.S. Consumer Staples ETF (IECS): ETF Research Reports
 
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