Starbucks (NasdaqGS:SBUX) Q4 2020 Earnings Prep

in EARNINGS/INVESTING IDEAS by

Starbucks Corporation (NasdaqGS:SBUX) is scheduled to report Q4 earnings results after markets close for trading on October 29, 2020.

The company is expected to report earnings of $0.31/share on revenue of $6.072 billion. The consensus earnings per share (EPS) of $0.31/share is based on a poll of 32 analysts and represents a decline in eps of −55.5% over the same quarter last year, when the company reported earnings of $0.70/share.

The revenue forecast of $6.072 billion based on a poll of 27 analysts implies a year-over-year (YoY) decline in revenue of −10.0%. Last year the company reported $6.747 billion in revenue for the quarter.

Expected to report EPS contraction of −55.5% for Q4, 2020
Metric Expected Prior Year YoY Change
Revenue $6,072.15 $6,747.00 −10.0%
EPS $0.31 $0.70 −55.5%

Earnings Call Trends

Historically, management has exceeded analyst expectations 6 out of the last 8 tracked quarters and met expectations 2 quarters.

What are your expectations from Starbucks Corporation for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q3, 2020 -$0.61 -$0.46 24.7% Beat
Q2, 2020 $0.32 $0.32 0% Met
Q1, 2020 $0.76 $0.79 4.1% Beat
Q4, 2019 $0.70 $0.70 0.0% Met
Q3, 2019 $0.73 $0.78 7.5% Beat
Q2, 2019 $0.57 $0.60 6.1% Beat
Q1, 2019 $0.65 $0.75 15.2% Beat
Q4, 2018 $0.60 $0.62 4.0% Beat

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 28, 2020, the stock price reacted by increasing 1.3%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
July 28, 2020 $76.46 $77.42 1.3% Increase
April 28, 2020 $77.74 $76.86 −1.1% Decline
January 28, 2020 $88.73 $86.72 −2.3% Decline
October 30, 2019 $84.13 $84.56 0.5% Increase

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −2.34, the model suggests that the company is not likely to be an earnings manipulator. A value of −2.34 implies a 1.0% chance of earnings manipulation.

Fundamentals And Technical Analysis

Starbucks Corporation is currently trading at $89.66/share, down −1.3% for the day. The company is trading at approximately 95.3% of its 52-week high of $94.13/share. The company’s stock price is up 15.8% since the last earnings report and up 1.3% over the previous week. The company’s 14 Day Relative Price Index (RSI) of 56.67 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.


NasdaqGS:SBUX Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of 78.30 and a forward P/E multiple of 92.80.

Starbucks Corporation’s current share price also implies a price-to-book (P/B) multiple of −12.16. The following table summarizes some other key fundamental ratios:

Data as of October 27, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q3
Period End Date June 28, 2020
Stock Price (Current) $89.66
P/E Ratio 78.3x
P/E Ratio (Fwd) 92.8x
PEG Ratio −1.3
Total Debt / Total Capital 19.6%
Levered Free Cash Flow -$449 million
EV / EBITDA 37.3x

Finbox

Starbucks Corporation is a large-cap stock with a market capitalization of $104.8 billion and a total enterprise value of $126.4 billion. The company operates in the Consumer Discretionary sector and the Hotels, Restaurants & Leisure industry.

Starbucks Corporation, together with its subsidiaries, operates as a roaster, marketer, and retailer of specialty coffee worldwide. The company operates in three segments: Americas; International; and Channel Development. Its stores offer coffee and tea beverages, roasted whole bean and ground coffees, single-serve and ready-to-drink beverages, and iced tea; and various food products, such as pastries, breakfast sandwiches, and lunch items. The company also licenses its trademarks through licensed stores, and grocery and foodservice accounts. It offers its products under the Starbucks, Teavana, Seattle’s Best Coffee, Evolution Fresh, Ethos, Starbucks Reserve, and Princi brand names. As of October 30, 2019, the company operated approximately 31,000 stores. Starbucks Corporation was founded in 1971 and is based in Seattle, Washington.

Expertise: financial modeling, mergers & acquisitions. Andy is also a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to do investment research. Andy’s background is in investment banking where he led the analysis on over 50 board advisory engagements involving mergers and acquisitions, fairness opinions and solvency opinions. Some of his board advisory highlights: - Sears Holdings Corp.’s $620 mm spin-off via rights offering of Sears Outlet, Hometown Stores and Sears Hardware Stores. - Cerberus Capital Management’s $3.3 bn acquisition of SUPERVALU Inc.’s New Albertsons, Inc. assets. Andy can be reached at andy@finbox.io or at +1 (516) 778-6257.

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