Earnings Preview: Starbucks

Jan.28.08 | About: Starbucks Corporation (SBUX)

Starbucks (NASDAQ:SBUX) is expected to report Q1 earnings on Wednesday, January 30, after market close, with a conference call scheduled for 5:00 pm ET.

Guidance


Analysts are looking for the coffee chain to post a profit of 28c on sales of $2.77B. The consensus range is 25c to 28c for EPS, and revenue range of $2.73B to $2.81B, according to First Call. In November, the company gave EPS guidance for Q1 of 28c, and 2008 guidance of $1.02 to $1.05.

Backdrop


The company, which has struggled financially in the last year, faces stiff competition, and has announced that it would test-market $1 coffee and free refills. Recently, CEO Jim McDonald was replaced by Chairman and former CEO Howard Schultz.

Analyst analysis


Piper views the CEO change as a "critical" step in the right direction, and believes Starbucks is experiencing the "classic turnaround." Banc of America upgraded shares on January 8 to Buy from Neutral, and sees Schultz's return as a step to more consistently returning cash to shareholders in the form of buybacks and/or dividends. JP Morgan says the company's increased attention to U.S. same-unit economics and increased international development are necessary.

Next event: Starbucks will hold its annual shareholders meeting on March 19 at 3:00 pm ET.