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Starbucks (SBUX) Dips More Than Broader Markets: What You Should Know

Zacks Equity Research

In the latest trading session, Starbucks (SBUX) closed at $90.48, marking a -1.72% move from the previous day. This change lagged the S&P 500's 0.07% loss on the day. Meanwhile, the Dow gained 0.14%, and the Nasdaq, a tech-heavy index, lost 0.22%.

Coming into today, shares of the coffee chain had lost 3.63% in the past month. In that same time, the Retail-Wholesale sector gained 7.17%, while the S&P 500 gained 4.58%.

Wall Street will be looking for positivity from SBUX as it approaches its next earnings report date. The company is expected to report EPS of $0.70, up 12.37% from the prior-year quarter. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $6.63 billion, up 5.24% from the year-ago period.

SBUX's full-year Zacks Consensus Estimates are calling for earnings of $2.83 per share and revenue of $26.39 billion. These results would represent year-over-year changes of +16.79% and +6.76%, respectively.

Investors might also notice recent changes to analyst estimates for SBUX. These revisions typically reflect the latest short-term business trends, which can change frequently. With this in mind, we can consider positive estimate revisions a sign of optimism about the company's business outlook.

Our research shows that these estimate changes are directly correlated with near-term stock prices. To benefit from this, we have developed the Zacks Rank, a proprietary model which takes these estimate changes into account and provides an actionable rating system.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. Over the past month, the Zacks Consensus EPS estimate has moved 0.03% higher. SBUX is currently a Zacks Rank #3 (Hold).

In terms of valuation, SBUX is currently trading at a Forward P/E ratio of 32.57. Its industry sports an average Forward P/E of 23.38, so we one might conclude that SBUX is trading at a premium comparatively.

It is also worth noting that SBUX currently has a PEG ratio of 2.51. The PEG ratio is similar to the widely-used P/E ratio, but this metric also takes the company's expected earnings growth rate into account. The Retail - Restaurants was holding an average PEG ratio of 2.28 at yesterday's closing price.

The Retail - Restaurants industry is part of the Retail-Wholesale sector. This industry currently has a Zacks Industry Rank of 156, which puts it in the bottom 40% of all 250+ industries.

The Zacks Industry Rank includes is listed in order from best to worst in terms of the average Zacks Rank of the individual companies within each of these sectors. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

You can find more information on all of these metrics, and much more, on Zacks.com.


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