How Detrimental Will the Coronavirus Be to Starbucks Going Into Earnings?

Starbucks Corp. (NASDAQ: SBUX) is set to report its most recent quarterly results after the closing bell on Tuesday. Analysts are calling for $0.76 in earnings per share (EPS) and $7.11 billion in revenue. The fiscal first quarter of last year reportedly had $0.75 in EPS and $6.63 billion in revenue.

There are some concerns about Starbucks’ operations in China as the spread of the coronavirus has increased. There is concern about restaurant sales as well. Some have shut locations and eaters are staying home. McDonald’s has announced that it would close its restaurant locations in Wuhan and surrounding cities where transportation has been halted. Starbucks is joining this trend and also has reportedly closed an unspecified number of stores in China.

With the coronavirus only coming around recently, it’s likely that the effect will not be seen in these companies until the following quarter. While the stock might reflect the concern, we won’t have numbers until the company provides them or updates its guidance.

We’ve already seen Starbucks’ stock pull back from this news, but it’s hard to gauge how big the impact of the coronavirus actually will be going forward. This could be detrimental, considering the China segment of the business has been posting solid growth.

CEO and President Kevin Johnson commented in the fiscal fourth-quarter report:

Our U.S. business delivered 6% comparable store sales growth in the fourth quarter, while China grew comparable store sales by 5% and total transactions by 13%. Our strong performance throughout fiscal 2019 gives us confidence in a robust operating outlook for fiscal 2020.

Overall, Starbucks stock had outperformed the broad markets with a gain of 32% in the past 52 weeks. However, in just the past quarter, the stock was only up nearly 7%.

A few analysts weighed in on Starbucks ahead of the report:

  • RBC has a Buy rating with a $97 price target.
  • Barclays has an Overweight rating with a $107 target.
  • JPMorgan has a Buy rating with a $94 target price.
  • Morgan Stanley has an Equal Weight rating and a $95 target.
  • Weeden has a Neutral rating.
  • Wedbush also has a Neutral rating.

Shares of Starbucks were last seen trading at $88.11, in a 52-week range of $66.20 to $99.72. The consensus price target is $95.93.