Yahoo Finance Starbucks: Online Sales Likely Drove Analyst Revisions after 1Q16
Good News and Warm Brews: Starbucks's 1Q16 Margins Expand
Earnings revision
Now that Starbucks’s (SBUX) 1Q16 results and management outlook are out, we’ll review how analysts have reacted and whether they’ve changed their estimates for the company. Estimate revisions tell us how analysts reacted to a company’s earnings. They can also offer insight into a company’s future earnings. Whenever analysts revise their estimates, stocks tend to move in tandem with the revision.
Earnings revised upwards
Following Starbucks’s 1Q16 results, analysts have revised their next-12-month earnings estimates slightly higher, by 0.3%, to $1.98 from $1.97. For fiscal 2016, analysts are estimating earnings per share of $1.89—slightly higher than management’s guidance of $1.88 per share. We believe the company’s new roastery subscription model and agreement with China’s Tmall could have led to this upward revision. Both these initiatives are part of online sales and not included in same-store sales growth.
Same-store sales growth revision
Analysts have revised their same-store sales growth estimates for each of the next four quarters, as you can see in the chart above. This revision decelerates revenue growth to 12.6% year-over-year compared to 15% growth in the past four quarters. However, operating margins are expected to rise to 24.6%, compared to 23.9% in the past four quarters. This means sales leverage through other channels, including online stores.
You can invest in Starbucks (SBUX) through ETFs such as the Consumer Discretionary Select Sector SPDR ETF (XLY). XLY invests about 4% of its portfolio in Starbucks. It also has holdings in other restaurants, such as McDonald’s (MCD), Yum! Brands (YUM), and Chipotle Mexican Grill (CMG).
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