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Starbucks (SBUX) Gains But Lags Market: What You Should Know

Zacks Equity Research
·3-min read

Starbucks (SBUX) closed at $85.62 in the latest trading session, marking a +1.61% move from the prior day. This change lagged the S&P 500's 2.59% gain on the day. At the same time, the Dow added 2.66%, and the tech-heavy Nasdaq gained 0.07%.

Coming into today, shares of the coffee chain had gained 1.59% in the past month. In that same time, the Retail-Wholesale sector lost 8.35%, while the S&P 500 lost 9.22%.

Investors will be hoping for strength from Starbucks as it approaches its next earnings release. On that day, Starbucks is projected to report earnings of $0.75 per share, which would represent a year-over-year decline of 25%. Our most recent consensus estimate is calling for quarterly revenue of $8.43 billion, up 3.47% from the year-ago period.

It is also important to note the recent changes to analyst estimates for Starbucks. These recent revisions tend to reflect the evolving nature of short-term business trends. As such, positive estimate revisions reflect analyst optimism about the company's business and profitability.

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Research indicates that these estimate revisions are directly correlated with near-term share price momentum. We developed the Zacks Rank to capitalize on this phenomenon. Our system takes these estimate changes into account and delivers a clear, actionable rating model.

Ranging from #1 (Strong Buy) to #5 (Strong Sell), the Zacks Rank system has a proven, outside-audited track record of outperformance, with #1 stocks returning an average of +25% annually since 1988. The Zacks Consensus EPS estimate has moved 0.1% lower within the past month. Starbucks currently has a Zacks Rank of #3 (Hold).

Digging into valuation, Starbucks currently has a Forward P/E ratio of 29.26. Its industry sports an average Forward P/E of 18.77, so we one might conclude that Starbucks is trading at a premium comparatively.

Also, we should mention that SBUX has a PEG ratio of 2.27. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. SBUX's industry had an average PEG ratio of 1.72 as of yesterday's close.

The Retail - Restaurants industry is part of the Retail-Wholesale sector. This industry currently has a Zacks Industry Rank of 179, which puts it in the bottom 29% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

Make sure to utilize Zacks.com to follow all of these stock-moving metrics, and more, in the coming trading sessions.


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Starbucks Corporation (SBUX) : Free Stock Analysis Report
 
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Zacks Investment Research