By Tonya Garcia, MarketWatch
Starbucks Corp. is scheduled to report first-quarter 2019 earnings on Thursday after the closing bell and while RBC Capital Markets analysts are bullish about the North American business revival, there are questions about China.
RBC is forecasting for 3% same-store sales growth in the Americas for the quarter, while FactSet is guiding for 3.1% growth in the region.
RBC says its proprietary data indicates same-store sales growth could be between 3% and 4%, but “there could be upside to our estimate given positive company comments at the Dec. 13 investor day about the impact of recent TV advertising and throughput initiatives, and strong restaurant and retail industry traffic trends in December.”
KeyBanc Capital Markets is also optimistic about U.S. same-store sales, thanks to efforts like Starbucks’s /zigman2/quotes/207508890/composite SBUX +0.98% partnership with Nestle S.A. /zigman2/quotes/208115528/delayed CH:NESN +1.50% that streamline the business.
The quarter will also shed light on risks in China, an important region for Starbucks’s /zigman2/quotes/207508890/composite SBUX +0.98% expansion. Areas of possible jeopardy include “weak China consumer confidence, potential U.S. brand backlash, and market share loss to discount competitors.”
RBC identifies a few ways that Starbucks can counteract the impact of any backlash from the trade war including joint marketing with Alibaba Group Holding Ltd. /zigman2/quotes/201948298/composite BABA -0.22% and support from the company’s own workforce.
RBC rates Starbucks shares outperform with a $78 price target.
Even with concerns, KeyBanc analysts say Starbucks’ growth in China has been “explosive,” with about 30% revenue and unit growth, 40% profit growth per year and same-store sales exceeding 5% growth until recently.
“While near-term visibility is limited, we do not believe the recent deceleration is indicative of a longer-term trend,” analysts wrote in a Dec. 18 note.
Starbucks stock has an average overweight rating and an average price target of $69.32 according to 31 analysts polled by FactSet.
Here’s what to expect:
Earnings: FactSet expects earnings of 65 cents per share, flat with last year’s result.
Estimize, a crowdsourcing platform that gathers estimates from Wall Street analysts, buy-side analysts, hedge-fund managers, company executives, academics and others, expects EPS of 66 cents.