What’s Been Driving Starbucks Stock?
Fiscal 4Q17 performance
Starbucks (SBUX) announced fiscal 4Q17 earnings after the market closed on November 2, 2017. The company posted adjusted EPS (earnings per share) of $0.55 on revenues of $5.7 billion. Compared to fiscal 4Q16, the company’s revenue fell 0.2%, while its EPS fell 1.8%.
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Analysts were expecting Starbucks to post EPS of $0.56 on revenues of $5.8 billion. Also, the company’s SSSG (same-store sales growth) of 2% failed to meet analysts’ expectation of 3.3%. Although Starbucks failed to meet analysts’ estimates, its stock price rose due to the company’s strong performance in China. Also, the company is planning to open 600 new restaurants in China in fiscal 2018. Along with these factors, the measures adopted by the company to improve its SSSG and the announcement of its new share repurchase program appear to have increased investors’ confidence, leading to a rise in the company’s stock price. As of November 7, 2017, Starbucks was trading at $57.22, which represents a rise of 4.3% since the announcement of fiscal 4Q17 earnings.
Since the beginning of the year, Starbucks has returned 3.1%. During the same period, peers Dunkin’ Brands (DNKN), McDonald’s (MCD), and Domino’s Pizza (DPZ) have returned 11.5%, 40.3%, and 6.8%, respectively. The iShares U.S. Consumer Services ETF (IYC) and the S&P 500 Index (SPX) have returned 9.5% and 15.7%, year-to-date, respectively.
In this series, we’ll look at Starbucks’s 4Q17 earnings call and compare its performance with analysts’ estimates. We’ll also cover management’s guidance and analysts’ estimates for fiscal 2018. Finally, we’ll wrap this series up by looking at the company’s valuation multiple and analysts’ recommendations.
First, let’s start our analysis by looking at Starbucks’s fiscal 4Q17 revenue.