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Starbucks (SBUX) Gains But Lags Market: What You Should Know

Zacks Equity Research

In the latest trading session, Starbucks (SBUX) closed at $90.35, marking a +0.48% move from the previous day. This move lagged the S&P 500's daily gain of 0.62%. Meanwhile, the Dow gained 0.61%, and the Nasdaq, a tech-heavy index, added 1.05%.

Heading into today, shares of the coffee chain had lost 6.42% over the past month, lagging the Retail-Wholesale sector's gain of 2.71% and the S&P 500's gain of 3.85% in that time.

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 12.9% 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.

For the full year, our Zacks Consensus Estimates are projecting earnings of $2.83 per share and revenue of $26.39 billion, which would represent changes of +16.94% and +6.76%, respectively, from the prior year.

Investors should also note any recent changes to analyst estimates for SBUX. These recent revisions tend to reflect the evolving nature of short-term business trends. With this in mind, we can consider positive estimate revisions a sign of optimism about the company's business outlook.

Based on our research, we believe these estimate revisions are directly related to near-team stock moves. 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. The Zacks Consensus EPS estimate has moved 0.03% higher within the past month. SBUX is holding a Zacks Rank of #3 (Hold) right now.

In terms of valuation, SBUX is currently trading at a Forward P/E ratio of 31.81. For comparison, its industry has an average Forward P/E of 23.8, which means SBUX is trading at a premium to the group.

Meanwhile, SBUX's PEG ratio is currently 2.4. 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. SBUX's industry had an average PEG ratio of 2.23 as of yesterday's close.

The Retail - Restaurants industry is part of the Retail-Wholesale sector. This industry currently has a Zacks Industry Rank of 147, which puts it in the bottom 43% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our individual industry groups by measuring the average Zacks Rank of the individual stocks within the groups. 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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