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What to Expect from Starbucks’s EPS in 2019

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Jan. 1 2019, Updated 10:30 a.m. ET

Fiscal 2018 performance

In fiscal 2018, Starbucks (SBUX) posted adjusted EPS of $2.42, a rise of 17.5% from $2.06 in fiscal 2017. Revenue growth, a lower effective tax rate, and share repurchases drove the company’s EPS during the period. However, part of the rise in its EPS was offset by the contraction of its EBIT margin.

For fiscal 2018, the company’s effective tax rate stood at 21.8% compared to 33.2% in fiscal 2017. The implementation of tax reforms in December 2017 and the company’s gains from its acquisition of the East China business, which weren’t subjected to income tax, lowered its effective tax rate for the period. In fiscal 2018, the company repurchased ~131.5 million shares, which drove its EPS by reducing its number of shares outstanding.

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Peer comparison and outlook

During the same period, McDonald’s (MCD) and Dunkin’ Brands (DNKN) posted EPS rises of 18.8% and 15.8%, respectively.

For fiscal 2019, analysts expect Starbucks to post EPS of $2.65, a rise of 9.6% from $2.42 in fiscal 2018. This growth will likely be driven by revenue growth and share repurchases and partially offset by lower operating margins.

For the same period, the company’s management expects its EPS to be in the range of $2.61–$2.66, which includes the unfavorable impact of the Global Coffee Alliance transaction.

Dividends

On November 1, Starbucks announced a quarterly dividend of $0.36 per share at an annualized payout rate of $1.44. On December 26, the company’s dividend yield stood at 2.28%, with its stock price trading at $63.08. On the same day, the dividend yields of its peers McDonald’s (MCD) and Dunkin’ Brands (DNKN) stood at 2.67% and 2.16%, respectively.

In 2018, the company paid a total dividend of $1.32, a rise of 25.7% from $1.05 in 2017. Next, we’ll look at analysts’ recommendations for Starbucks stock.

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