Is Starbucks a Stock to Buy After Q1 Results?

Starbucks Corp. (NASDAQ: SBUX) reported fiscal first-quarter financial results after markets closed Tuesday. The coffee chain said that it had a $0.61 in earnings per share (EPS) and $6.7 billion in revenue. That compared with consensus estimates of $0.55 in EPS on revenue of $6.92 billion. The same quarter from last year reportedly had EPS of $0.79 and $7.10 billion in revenue.

Consolidated net revenues declined 5% from the prior year due to lost sales related to the COVID-19 outbreak. These lost sales include modified operations, reduced hours, and reduced customer traffic.

During the quarter, global comparable store sales declined 5%, driven by a 19% drop in comparable transactions, partially offset by a 17% increase in average ticket. This consisted of Americas and U.S. comparable store sales decreasing 6% and international comparable store sales decreasing 3%.

Net revenues for the Americas segment decreased 6% year over year to $4.7 billion, primarily due to a decrease in comparable store sales, as well as lower product sales. Comparable transactions dropped by 21% and average ticket prices has increased by 20%.

International segment revenues increased by 5% to $1.7 billion. Transactions dropped by 10% but average ticket prices increased 8%.

The company opened 278 net new stores in the first quarter, raising its total to 32,938 stores at the end of the quarter. Note that stores in the United States and China comprised 61% of the company’s global portfolio at the end of the quarter, with 15,340 and 4,863 stores, respectively.

Looking ahead to the fiscal second quarter, Starbucks expects to see a U.S. comparable-store sales growth in the range of 5% to 10% and China comparable sales growth of nearly 100% and EPS in the range of $0.45 to $0.50. Consensus estimates call for $0.59 in EPS and $6.7 billion in revenue for the quarter.

Starbucks cash and cash equivalents totaled $5.03 billion at the end of the quarter, up from $4.35 billion at the end of the previous fiscal year.

Starbucks stock traded down 5.8% Wednesday morning to $98.57, in a 52-week range of $50.02 to $107.75. The consensus price target is $106.34.

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