Starbucks Q3 Earnings Awaited As Stock Trends Lower

Starbucks Corporation (NASDAQ:SBUX) is set to print third-quarter financial results after the market closes Tuesday. The stock was nudging lower heading into the event. 

When the multinational coffee chain printed its second-quarter results May 2, the stock plunged over 9% the following day and entered a downtrend, which brought Starbucks to the $95.55 mark on July 7. 

The coffee giant’s North American same-store sales grew 7%, missing estimates of 8.4%.

Still, demand remains strong in the company’s domestic market. Starbucks said customer traffic grew 1% in the quarter. What’s more, customers were buying more breakfast sandwiches along with their coffee orders and adding pricey extras like cold foam to beverages.

“We actually see growth in our largest sizes over our smaller sizes, so we’re not seeing down trading in our customer base,” said CEO Laxman Narasimhan to analysts on the company’s conference call.

However, according to Yahoo Finance, customers were complaining of their value for money, “Starbucks is low-grade swill; regardless of how many chemically infused “flavors” they poison you with. Second, How is it they are allowed to remain in China?” said Mandoist 

For the second quarter, Starbucks reported EPS of 74 cents on revenue of $8.72 billion. The company beat the EPS estimate of 65 cents and the $8.4-billion revenue estimate. 

For the third quarter, analysts estimate Starbucks will print earnings per share of 95 cents on revenues of $9.291 billion. 

On July 27, Wedbush analyst Nick Setyan maintained a Neutral rating and raised the price target from $110 to $112. The new price target suggests about 12% upside for the stock. 

From a technical analysis perspective, Starbucks’s stock looks neutral heading into the event, trading close to the 200-day simple moving average (SMA). It should be noted that holding stocks or options over an earnings print is akin to gambling because stocks can react bullishly to an earnings miss and bearishly to an earnings beat. 

The Starbucks Chart: Starbucks broke up through the 200-day SMA on July 12 and has spent the last four trading days back testing the area as support. On Tuesday, Starbucks temporarily fell through the 200-day SMA but by the afternoon, the stock had regained the area as support. 

• On Tuesday, Starbucks was working to print a hammer candlestick, indicating the local bottom may have occurred. If the stock receives a bullish reaction to its earnings print, the candlestick will confirm and Starbucks is likely to negate its downtrend by rising on Wednesday.
• If the stock suffers a bearish reaction to the news and falls under the 200-day SMA, the downtrend will remain intact, and the stock could enter into a longer-term bear cycle.
• Starbucks has resistance above at $104.02 and at $109.05 and support below at $99.15 and at $97.19.

Produced in association with Benzinga

Edited by Eunice Anyango Oyule and Judy J. Rotich