Coffee chain Starbucks (SBUX) is set to report its Q2 earnings next week. Its stock is up 19% as the company looks to improve its customer service and cut costs as it strives to turn around its business.
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According to TipRanks’ Options Tool, options traders expect about a 7.21% move in either direction in SBUX stock in reaction to its Q2 results.
What Wall Street Expects
Wall Street analysts expect Starbucks to reveal quarterly earnings of $0.43 per share, indicating an increase of 4.9% compared to the year-ago period. Analysts forecast revenues of $9.16 billion, representing an increase of 4.5% year over year.
Will SBUX beat these forecasts? As can be seen below, it has a very mixed track record in outperforming market expectations.
Key Issues Ahead of Earnings
Starbucks, and its stock, have had a tough last couple of years hit by price increases, strong competition from other coffee chains both in the U.S. and in foreign markets like China, and a series of boycotts and strikes tied to unionized barista complaints over pay and benefits.
Chief executive officer Brian Niccol has launched a huge $2 billion cost-cutting drive, including job losses and bringing previously outsourced tech jobs back in-house. Other investments include hiring more store workers and renovating its cafes.
In Q1 the company reported that global revenue grew 5% year-over-year to $9.9 billion, with global comparable store sales accelerating to 4% growth. North America revenue grew 3% to $7.3 billion.
However, Q1 EPS was $0.56, down 19% year-over-year, reflecting ongoing investments and margin pressure. It was also hit by inflation from tariffs and higher coffee prices.
Analysts expect that North America revenues in Q2 will rise 2.9% year over year, with global sales up 8.2%.
Analyst Comment
Stifel analyst Chris O’Cull raised his price target on Starbucks to $115 from $105 and kept a Buy rating. He expects Starbucks to report earnings at least in line with expectations. He believes domestic sales trends have been “solid” based on a review of mobile location data.
Tigress Financial analyst Ivan Feinseth resumed coverage of Starbucks with a Buy rating and $122 price target down from $136. He believes the company’s turnaround is driving a “compelling combination” of operational improvement, AI-driven innovation, and global expansion. These will accelerate Starbucks’ shareholder value creation.
Is SBUX a Good Stock to Buy Now?
On TipRanks, SBUX has a Moderate Buy consensus based on 14 Buy, 12 Hold and 2 Sell ratings. Its highest price target is $122. SBUX stock’s consensus price target is $103.17, implying a 5.08% upside.
