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Jan. 24, 2019, 2:56 p.m. EST

Starbucks earnings: The Americas are making a comeback, but China is an uncertainty

RBC analysts say coffee retailer’s same-store sales for the Americas could rise between 3% and 4%

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By Tonya Garcia, MarketWatch


Reuters
Starbucks same-store sales are regaining momentum, analysts say

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 -0.28%   partnership with Nestle S.A. /zigman2/quotes/208115528/delayed CH:NESN -0.89%   that streamline the business.

Read: Olive Garden parent Darden Restaurants, Chick-fil-A are names to watch in 2019

The quarter will also shed light on risks in China, an important region for Starbucks’s /zigman2/quotes/207508890/composite SBUX -0.28%   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 +0.86%   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.

Also: Beyond Meat is going public: 5 things to know about the plant-based meat maker

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.

/zigman2/quotes/207508890/composite
US : U.S.: Nasdaq
$ 86.04
-0.24 -0.28%
Volume: 7.95M
Dec. 10, 2019 4:00p
P/E Ratio
29.41
Dividend Yield
1.91%
Market Cap
$101.90 billion
Rev. per Employee
$86,863
loading...
/zigman2/quotes/208115528/delayed
CH : Switzerland: SWX
CHF 102.96
-0.92 -0.89%
Volume: 5.70M
Dec. 10, 2019 5:31p
P/E Ratio
33.02
Dividend Yield
2.38%
Market Cap
CHF299.95 billion
Rev. per Employee
CHF296,880
loading...
/zigman2/quotes/207508890/composite
US : U.S.: Nasdaq
$ 86.04
-0.24 -0.28%
Volume: 7.95M
Dec. 10, 2019 4:00p
P/E Ratio
29.41
Dividend Yield
1.91%
Market Cap
$101.90 billion
Rev. per Employee
$86,863
loading...
/zigman2/quotes/201948298/composite
US : U.S.: NYSE
$ 200.45
+1.71 +0.86%
Volume: 11.63M
Dec. 10, 2019 6:30p
P/E Ratio
23.88
Dividend Yield
N/A
Market Cap
$531.30 billion
Rev. per Employee
$781,259
loading...
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