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Starbucks and Analysts’ Earnings Estimates for Fiscal 2Q18

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Dec. 4 2020, Updated 10:53 a.m. ET

Analysts’ earnings estimate

Analysts are expecting Starbucks (SBUX) to post adjusted EPS (earnings per share) of $0.53 in fiscal 2Q18, which represents a growth of 17.8% from $0.45 in fiscal 2Q17. EPS growth is expected to be driven by revenue growth, a lower effective tax rate, and share repurchases. However, some of its EPS growth is expected to be offset by a fall in its EBIT (earnings before interest and tax) margin.

Analysts are expecting Starbucks’s EBIT margin to fall from 17.9% in fiscal 2Q17 to 17%. Growth in food sales is expected to outpace beverage sales, which could deleverage the company’s gross margins and labor expenses, thus lowering its net margin. Analysts expect Starbucks’s effective tax rate to be 27.3% in fiscal 2Q18 compared to 33.4% in 2Q17.

The company has repurchased 43.6 million shares for $2.4 billion from the beginning of 3Q17 through the end of fiscal 1Q18. Share repurchases boost the company’s stock price by lowering the number of shares outstanding.

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Peer comparisons

During fiscal 2Q18, analysts are expecting Dunkin’ Brands (DNKN), McDonald’s (MCD), and Domino’s Pizza (DPZ) to post EPS growth of 9.1%, 14.1%, and 40.5%, respectively.

Outlook

For the next four quarters, analysts are expecting Starbucks to post EPS of $2.53, which represents a growth of 18.8% from $2.13 in the corresponding four quarters of the previous year. For fiscal 2018, management has set the EPS guidance at $2.48–$2.53, which represents a growth of 20.4%–22.8% from $2.06 in 2017.

Next, we’ll take a look at Starbucks’s valuation multiple.

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