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Likely Coronavirus Impact on Starbucks' (SBUX) Q2 Earnings

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Starbucks Corporation (SBUX - Free Report) is scheduled to report second-quarter fiscal 2020 results on Apr 28, after the closing bell. In the last reported quarter, the company’s earnings surpassed the Zacks Consensus Estimate by 4%.

Q2 Expectations

The Zacks Consensus Estimate for second-quarter earnings is pegged at 31 cents, lower than 60 cents reported in the prior-year period. Over the past 30 days, the company’s earnings estimates have been revised downwards by 34%. For quarterly revenues, the consensus mark is pegged at $5,915 million, suggesting growth of 6.2% from the prior-year quarter.

China Likely to Have Hurt Q2

Starbucks top and bottom lines in the quarter to be reported are likely to reflect the impact of the coronavirus pandemic. In February, China comparable stores sales plunged 78%. However, in March comparable stores sales recovered at a slightly faster pace and the company witnessed a decline of 64%. Moreover, in the last week of March sales declined 42%, representing seventh straight week of sequential improvement. Overall, comparable sales in China are anticipated to witness a sharp decline of 50%. Consequently, the company expects its China revenues to be impacted by $400 million to $430 million on account of the coronavirus outbreak.

Americas Segment Likely to Have Disappointed

Before coronavirus-induced crisis in the United States, the company had been witnessing robust sales growth for almost four years. Quarter to date through Mar 11, U.S. comparable store sales were up 8%. After Mar 12, comparable store sales declined sharply as the company temporarily closed more stores. Comparable store sales in the United States were down 3% year over year in the fiscal second quarter.

Disappointing Preliminary Q2 EPS

Owing to business disruption in China on account of the coronavirus, the company’s GAAP and non-GAAP earnings per share for the fiscal second quarter are likely to have been impacted in the range of 15 to 18 cents, in line with its prior estimate. Moreover, the company’s earnings are likely to have been affected by the coronavirus outbreak in the United States and other parts of the world. 

Owing to the aforementioned factors, the company’s adjusted earnings in second-quarter fiscal 2020 is estimated to be 32 cents, down sharply from the prior-year quarter adjusted earnings of 60 cents.

Starbucks Corporation Price and EPS Surprise

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Starbucks this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that's not the case here. 

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Starbucks has an Earnings ESP of +0.00%.

Zacks Rank: The company has a Zacks Rank #3.

Stocks With Favorable Combination

Here are some stocks from the Restaurant space that investors may consider as our model shows that these have the right combination of elements to post an earnings beat in the upcoming releases:

Papa John's International, Inc. (PZZA - Free Report) has a Zacks Rank #3 and an Earnings ESP of +15.44%.  You can see the complete list of today’s Zacks #1 Rank stocks here.

Yum China Holdings, Inc. (YUMC - Free Report) has a Zacks Rank #2 and an Earnings ESP of +18.37%.

Wingstop Inc. (WING - Free Report) has an Earnings ESP of +2.15% and a Zacks Rank #3.

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