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Starbucks Met Analysts’ Earnings Estimates in Fiscal 2Q18

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

Fiscal 2Q18 performance

Starbucks (SBUX) posted adjusted EPS (earnings per share) of $0.53 in fiscal 2Q18, which was in line with analysts’ expectations. Year-over-year, the company’s EPS rose 17.8%.

This rise was driven by revenue growth, a lower effective tax rate, and share repurchases in the last 12 months. However, some of the EPS growth was offset by a contraction in the company’s EBIT (earnings before interest and tax) margin.

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Starbucks’s effective tax rate stood at 19.1% in fiscal 2Q18 compared to 33.4% in fiscal 2Q17. In the last four quarters, the company has repurchased 71 million shares for $4 billion. Share repurchases drive the company’s earnings by lowering its number of shares outstanding. The company has sanctioned an additional 100 million shares for its ongoing repurchase program, which has increased the shares available under its current repurchase program to 124 million.

Peer comparison

During the same period, Dunkin’ Brands (DNKN) and Domino’s Pizza (DPZ) posted EPS rises of 29.2%, and 58.7%, respectively, and McDonald’s (MCD) is expected to post an EPS rise of 13.7%.

Outlook

For the next four quarters, analysts expect Starbucks to post EPS of $2.59, which represents a rise of 17.2% compared to $2.21 in the corresponding four quarters of the previous year. This EPS growth is expected to be driven by revenue growth and share repurchases. For fiscal 2018, Starbucks’s management has set its EPS guidance in the range of $2.48–$2.53, which represents a rise of 20.4%–22.8% from $2.06 in 2017.

Next, let’s look at Starbucks’s valuation multiple.

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