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Starbucks’s and McDonald’s: How EPS Growth Prospects Stack Up

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Analysts’ EPS expectations for SBUX

For the next four quarters, analysts forecast Starbucks (SBUX) to post adjusted EPS of $2.89, which represents a rise of 14.6% from $2.52 in the corresponding four quarters of the previous year. Starbucks’s EPS growth is likely to be driven by revenue growth and share repurchases. However, some of the increase in EPS is likely to be offset by lower EBIT margin and higher interest expenses.

Starbucks’s EBIT margin has been forecasted to fall from 17.5% in the corresponding four quarters of the previous year to 17.0%. The company’s streamlining initiative is likely to lower its EBIT margins. However, sales leverage and cost-saving initiatives are expected to offset some of the declines in the EBIT margin. SBUX’s interest expenses are expected to rise from $258.1 million to $316.5 million.

Starbucks had repurchased 141.5 million shares in the last four quarters. The company had the authorization to repurchase 59.5 million more shares at the end of the previous quarter.

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Analysts’ EPS expectation for MCD

For the next four quarters, analysts are expecting McDonald’s (MCD) to post adjusted EPS of $8.22, which represents a rise of 4.8% from $7.84 in the corresponding four quarters of the previous year.

The revenue growth, expansion of EBIT margin, and share repurchases are likely to drive the company’s EPS in the next four quarters. McDonald’s EBIT margin is projected to expand from 43.2% in the corresponding quarters of the previous year to 44.3%. The growth in higher margin franchisee business due to refranchising of company-owned restaurants and opening of new restaurants and sales leverage from positive SSSG are likely to drive the company’s EBIT margin. However, labor inflation, the company’s investment in growth initiatives, and the new accounting standard are expected to offset some of the expansions in the company’s EBIT margin.

McDonald’s had repurchased 27.2 million shares for $4.46 billion in the last four quarters. The company had the authorization to repurchase shares worth ~$6.05 billion at the end of the previous quarter.

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