Starbucks (SBUX) Stock Plummets on a Revenue Miss, Disappointing EPS Guidance Prompts Analyst to Downgrade to Hold
Starbucks (NASDAQ: SBUX) reported Q4 EPS of $1.00, $0.01 better than the analyst estimate of $0.99. Revenue for the quarter came in at $8.1 billion versus the consensus estimate of $8.21 billion.
Shares of the company are down 4.7% in pre-open as a result.
“Our strong finish to fiscal 2021, including record performance in the fourth quarter, demonstrates the resilience of Starbucks and reinforces the value of the bold strategic moves we have taken over the past two years. Through it all, we have thoughtfully navigated a strong recovery with an eye towards our future, all guided by our Mission and Values,” said Kevin Johnson, President and CEO.
SBUX said same-store sales rose 22% compared to a year-ago period and 11% on a two-year basis. The company plans to add roughly 2,000 net new cafes in the next fiscal year.
On the outlook front, Starbucks said it expects GAAP earnings per share to decrease by 4% and adjusted earnings per share to rise by at least 10%. This is lower than the analyst consensus of EPS rising over 15% than in the fiscal 2021 year.
The company also guided for same-store sales in the high single digits and revenue between $32.5 billion to $33 billion, higher than the consensus of $32.07 billion.
Starbucks also announced a $20 billion of returning capital to shareholders over the next three years through share repurchases and dividends.
Stifel analyst Chris O'Cull downgraded Starbucks to Hold from Buy and lowered the price target to $112.00 per share from the prior $130.00.
“Nearly one year ago, we argued the company would improve its performance more quickly than investors anticipated, leading to earnings upside. At this point, that thesis has played out, and the company now grapples with significant inflationary pressures and investments that are weighing on the margin outlook. Given the magnitude of the cost pressure, we struggle to argue enough price can be taken to offset the headwinds in the business entirely or that inflation will diminish over the next few quarters. As a result, we reduced our FY22 earnings estimate to $3.40 from $3.65 and our FY23 estimate to $3.95 from $4.12,” O'Cull said in a client note.
Guggenheim analyst Gregory Francfort reiterated a Neutral rating and lowered the price target to $115.00 per share from the prior $126.00 to reflect a “sizable downward revision to 2022 EPS estimates.”
“The company announced this week that it is taking average hourly pay to $17 (with a floor of $15) by the middle of 2022, with this labor investment pressuring margins. There is a reasonable argument to be made that the Starbucks multiple should expand on depressed 2022 earnings. However, with visibility into 2023 margin stabilization not likely coming in the medium term and the stock already trading at an elevated P/E multiple vs. historical ranges, it seems difficult to see a reason for why shares would move materially higher from current levels in the near to medium term,” Francfort commented in a note.