Here's What The Buy Side Expects From Starbucks

| About: Starbucks Corporation (SBUX)

Starbucks Corp. (SBUX) is set to report FQ1 2014 earnings after the market closes on Thursday, January 23. Over the past few years we have seen the rise of Starbucks as a global leader in coffee. The company founded in Pike Place Market in Seattle now touts 20,891 stores in over 60 countries. In 2013 SBUX stock had an incredible year, the price was up 43% and financial expectations are very high for 2014.

Wall Street analysts are projecting about 13% year over year revenue growth and about 21% yoy EPS growth. As Starbucks are setup in malls across the US, the poor retail sales numbers from this holiday season could become a factor. Less shopping mall traffic could easily mean fewer sales for Starbucks and that may have an impact on the top line. Additionally increased competition in the coffee business from McDonald’s (NYSE:MCD) and Dunkin Brands Group (NASDAQ:DNKN) could come into play making it more difficult for Starbucks to keep up with the high expectations from Wall Street. Here’s what the buy-side is expecting from Starbucks this quarter.

The information below is derived from data submitted to the Estimize.com platform by a set of Buy Side and Independent analyst contributors.image

The current Wall Street consensus expectation is for Starbucks to report 69c EPS and $4.298B revenue while the current Estimize.com consensus from 39 Buy Side and Independent contributing analysts is 69c EPS and $4.286B revenue. This quarter the buy-side as represented by the Estimize.com communtiy is expecting Starbucks to miss the Wall Street consensus on revenue and report in-line on profit.

The magnitude of the difference between the Wall Street and Estimize consensus numbers often identifies opportunities to take advantage of expectations that may not have been priced into the market. In this case we are seeing a very small differential between the 2 groups’ forecasts.

By tapping into a wider range of contributors including hedge-fund analysts, asset managers, independent research shops, students, and non professional investors Estimize has created a data set that is up to 69.5% more accurate than Wall Street, but more importantly it does a better job of representing the market’s actual expectations. It has been confirmed by an independent academic study from Rice University that stock prices tend to react with a more strongly associated degree to the expectation benchmark from Estimize than from the Wall Street consensus.image

The distribution of estimates published by analysts on Estimize range from 66c to 72c EPS and $4.209B to $4.367B in revenues. This quarter we’re seeing a moderate distribution of estimates compared to previous quarters.

The size of the distribution of estimates relative to previous quarters often signals whether or not the market is confident that it has priced in the expected earnings already. A larger distribution of estimates signaling the potential for greater volatility post earnings, a smaller vice versa.image

The Wall Street EPS consensus went up temporarily but returned to its original value of 69c. The Wall Street revenue consensus increased throughout the quarter from $4.285B to $4.298B. The Estimize EPS consensus slipped from 70c to 69c and the Estimize revenue consensus fell from $4.295B to $4.286B. Timeliness is correlated with accuracy and at the very end of the quarter we saw upward revenue revisions from both groups.image

The analyst with the highest estimate confidence rating this quarter is Analyst_7718081 who projects $2.52 EPS and $5.640B in revenue. In the Winter 2014 season, Analyst_7718081 is currently ranked as the 46th best analyst and is ranked 253rd overall among over 3,450 contributing analysts. Estimate confidence ratings are calculated through algorithms developed by deep quantitative research which looks at correlations between analyst track records and tendencies as they relate to future accuracy. In this case the highest rated analyst agrees with the Estimize community that Starbucks will report inline on profit but come up slightly short on revenue.

The growth projections are high for Starbucks which helps to explain why the stock price has increased so steadily since 2009. However, this quarter analysts on the Estimize.com platform are expecting Starbucks to meet Wall Street expectations on profit but miss on revenue.

Disclosure: None.