Starbucks SBUX is a roaster and retailer of specialty coffee globally. Besides its fresh, rich-brewed coffees, the company's offerings include many complimentary food items and a selection of premium teas and other beverages, sold mainly through its retail stores.
Analysts have taken their earnings expectations lower, landing the stock into an unfavorable Zacks Rank #5 (Strong Sell).
Image Source: Zacks Investment Research
Let’s take a closer look at how the company currently stacks up.
Starbucks Hires New CEO
Starbucks shares faced pressure to start the year, up roughly 6% overall and widely underperforming relative to the S&P 500. Quarterly results have been a source of volatility, though a recent CEO swap perked shares up in a big way near the end of August.
Former Chipotle Mexican Grill CEO Brian Niccol replaced Laxman Narasimhan back in August. Investors remain hopeful that the swap will bring some positivity, particularly after the several-year-long patch of rough price action. Over the last three years, SBUX shares are down -6%.
Image Source: Zacks Investment Research
The company’s latest set of quarterly results was a bit rough, with global comparable store sales declining 7% but getting a slight boost from a 2% increase in average ticket. As has been the case, China continues to be a thorn in the side for SBUX, with comparable store sales in China falling 14% alongside an 8% decline in average ticket price.
The China story has been a big deal for obvious reasons – the region accounts for 30% of the company’s stores overall. Below is a chart illustrating the company’s sales on a quarterly basis over the last five years.
Image Source: Zacks Investment Research
But new CEO Brian Niccol remains positive, stating:
‘It is clear we need to fundamentally change our strategy to win back customers. ‘Back to Starbucks’ is that fundamental change,’
He continued -
‘My experience tells me that when we get back to our core identity and consistently deliver a great experience, our customers will come back. We have a clear plan and are moving quickly to return Starbucks to growth.’
Bottom Line
Analysts’ negative revisions rolled in following the release of its latest quarterly results, with weak China sales continuing to be a thorn in the company’s side.
Starbucks SBUX is a Zacks Rank #5 (Strong Sell), indicating that analysts have taken a bearish stance on the company’s earnings outlook.
For those seeking strong stocks, a great idea would be to focus on stocks carrying a Zacks Rank #1 (Strong Buy) or a Zacks Rank #2 (Buy). These stocks sport a notably stronger earnings outlook and the potential to deliver explosive gains in the near term.
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Starbucks Corporation (SBUX) : Free Stock Analysis Report
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