Banking

Starbucks Earnings Due Amid Rising Costs, As Stock Offers Multiple Setups

Coffee chain Starbucks (SBUX) reports fiscal fourth-quarter earnings after the close on Thursday, as restaurants try to ease investors’ concerns about rising costs. Starbucks stock fell, but was in a base.




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The company reports as it tries to attract workers and navigate rising supply costs and another round of coronavirus-related lockdowns in China.

Starbucks Earnings

Estimates: Wall Street expects Starbucks earnings to jump 94% to 99 cents per share, as the chain rebounds from the hit it took due to the pandemic last year. Revenue was seen gaining 32% to $8.214 billion.

Same-store sales were seen rising 18.2% overall, according to FactSet.

Results: Due after the close on Thursday.

Starbucks Stock

Starbucks stock slipped 0.5% to 114.39 on the stock market today. Shares were in a flat base with a 126.42 buy point.

However, the setup also works as a double-bottom base with a 120.86 buy point. And if the stock moves above Wednesday’s intraday high, which would reverse a three-month downtrend, the advance could work as an early entry off the 50-day line.

Starbucks stock has a 59 Composite Rating. Its EPS Rating is 70. Its relative strength line has been trending lower since late July.

Among other restaurant stocks, McDonald’s (MCD) rose 2.8%. The fast-food icon reported earnings on Wednesday.

U.S.-China Sales Gap?

In July, management said Starbucks’ in-store cafe seating in U.S. locations wasn’t fully reopened yet. Starbucks said then that its cold-brew and customizable coffee items — along with its loyalty program and drive-thru and digital orders — continued to resonate with customers.

Heading into Thursday’s earnings report, analysts largely expected same-store sales in the U.S. to meet expectations. But they expected a weaker showing out of China, whose zero-tolerance approach to Covid has led to stricter lockdowns than in the U.S.

Starbucks and other U.S. restaurants are also struggling to find employees, amid resistance to lower-paying labor, health risks and unruly customers. Nearly 900,000 people who worked in food-service and other hospitality jobs quit in August, according to government data.

“Labor is a challenge for everyone, and it sometimes affects service levels,” Stephens analyst James Rutherford said this week in a research note about Starbucks stock.

Starbucks Stock: Supply-Chain Costs

Meanwhile, after a pandemic online buying boom, backups at shipyards, warehouses and other links along the nation’s supply chain have pushed purchasing and shipping costs for many goods higher.

Starbucks in July said that it purchased green coffee — or product that hasn’t been roasted yet — 12 to 18 months in advance. It said then that it had those prices locked for the next 14 months.

“There is zero debate about the company’s fundamental strength or ability to grow,” Quo Vadis analyst John Zolidis said in a research note on Tuesday. “The question is whether (Starbucks stock) has sufficient revenue growth drivers to offset an increasingly onerous cost environment.”

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