EPS (earnings per share) is the most anticipated update that investors and analysts look for in upcoming earnings releases. In this part of the series, we’ll look at management’s guidance and analysts’ estimates for Starbucks’s (SBUX) 1Q16 earnings.
Estimates for 1Q16
Wall Street analysts are expecting Starbucks to report EPS of $0.45, which matches management guidance. In 4Q15, Starbucks met its guidance as well as analysts’ estimates. When a company beats analysts’ estimates, the shares may soar, and vice versa. After the 4Q15 earnings, Starbucks shares were trading flat, showing that expectations were already priced into the stock. This is why analysts’ estimates are important to watch.
You may also access Starbucks through ETFs such as the Consumer Discretionary Select Sector SPDR ETF (XLY). XLY invests about 4% in Starbucks and also has holdings in other restaurants such as McDonald’s (MCD), Yum! Brands (YUM), and Chipotle Mexican Grill (CMG).
Estimates for 2016
For 2016, Starbucks is expected to report EPS of $1.89, which will translate into an EPS growth of about 20% from $1.58 in 2015. A 20% growth in EPS is priced into the shares. If the company misses this expectation, shares will see a downward movement.
Next, let’s look at Starbucks’s valuation multiples.