Starbucks (SBUX) Dips on a Revenue Miss, Analysts Bullish on Raised Guidance

Starbucks (NASDAQ: SBUX) reported mixed earnings for its fiscal second quarter, yielding a move lower in the stock given high expectations.

The company made a profit of $0.62 per share to top the $0.53 Street views. However, Q2 sales were reported at $6.7 billion to miss on the $6.8 billion expected. This marks a rise in net sales by 11% with same-store sales up 15% from a year-ago period when the pandemic facilitated a 10% decline.

“I am very pleased with our progress to date in fiscal 2021, as our second quarter results demonstrated impressive momentum in the business with full sales recovery in the U.S. Our strong results validate our ability to adapt to changes in our environment and the needs of our customers,” said Kevin Johnson, President, and CEO.

“We have positioned Starbucks for the inevitable great human reconnection that we see unfolding in the U.S. and will propagate in every market around the world, where people once again connect with others face-to-face to heal, to belong, to reflect, to share and to celebrate.”

Same-stores rose by 9% in the US to return to the pre-pandemic levels. The average ticket is up 21% but the traffic fell by 10%. In Europe, same-store sales were up 35%, while China witnessed a surge of 91% as Q2 compares with a year-ago period when sales crashed 50%.

Going forward, Johnson said that that vaccination progress is key to predicting a market’s recovery. For its fiscal 2021 year, SBUX is projecting to make a profit between $2.65 and $2.75 per share, up from its prior range of $2.42 to $2.62 per share.

The EPS forecast is also hiked to $2.90 to $3.00 per share, again higher from its previous outlook of $2.70 to $2.90 per share. The raised guidance topped the analysts’ views of $2.85 per share.

On a full-year basis, SBUX upgraded its guidance to a range between $28.5 billion to $29.3 billion from a prior range of $28 billion to $29 billion. In this segment, the Street was calling for revenues of $28.6 billion.

Credit Suisse analyst Lauren Silberman says that she “continues to view SBUX as one of the highest quality growth companies in restaurants,” fueled by “8-10% revenue growth, margin expansion and benefit from repurchases.”

The analyst raised the price target to $125.00 per share on the Outperform-rated SBUX from the prior $116.00.

Jefferies analyst Andy Barish is even more bullish as his new price target on SBUX sits at $135.00 per share, from $118.00.

“Strong F2Q, particularly US and Int'l margins, although China SSS slight miss given C-19 flareups around CNY. Nonetheless, comp momentum continues to outperform in the US and China remains on track for FY guide. We view the FY21 margin/EPS guide raise as achievable, and potentially conservative. "Growth at Scale" set to generate 10-12% EPS growth over long term and mid-teens TSR,” he said in a note sent to clients.

SBUX is down 3.2% in New York today.

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