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Will Starbucks (SBUX) Beat Earnings Estimates This Quarter?

Zacks Equity Research

We expect the coffee giant, Starbucks Corporation (SBUX), to beat expectations when it reports fiscal third quarter 2013 results on Jul 25.

Why a Likely Positive Surprise?

Our proven model shows that Starbucks is likely to beat earnings because it has the right combination of two key ingredients.

Positive Zacks ESP: Expected Surprise Prediction or ESP (Read: Zacks Earnings ESP: A Better Method), which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is at 1.89%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.

Zacks #2 Rank (Buy): Starbucks carries a Zacks Rank #2 (Buy). Note that stocks with Zacks Ranks of #1, 2 or 3 have a significantly higher chance of beating earnings. The Sell rated stocks (#4 and 5) should never be considered going into an earnings announcement.

The combination of Starbucks’ Zacks Rank #2 (Buy) and 1.89% ESP makes us very confident about a positive earnings beat on Jul 25.

What is Driving the Better-Than-Expected Earnings?

Innovations, better operating leverage, cost control and lower coffee costs are expected to lead to a positive earnings surprise in the upcoming quarter.

We believe that Starbucks has compelling growth drivers like the La Boulange bakery items, Verismo at-home coffee machine, Teavana tea, K-Cups portion packs, its loyalty program and food innovations to sustain earnings momentum in the upcoming quarters.

Other Stocks to Consider

Here are some other companies in the retail/restaurants sector that can be considered as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Burger King Worldwide, Inc. (BKW), Earnings ESP of +5.26% and a Zacks Rank #1 (Strong Buy).

Cracker Barrel Old Country Store, Inc. (CBRL), Earnings ESP of +8.15% and a Zacks Rank #1 (Strong Buy).

Jack in the Box Inc. (JACK), Earnings ESP of +2.63% and a Zacks Rank #1 (Strong Buy).

Read the Full Research Report on CBRL

Read the Full Research Report on SBUX

Read the Full Research Report on JACK

Read the Full Research Report on BKW

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