Guggenheim has adjusted its outlook for Starbucks Corporation (NASDAQ: NASDAQ:SBUX), reducing the coffee giant's price target from $95.00 to $93.00.
The firm retained a neutral stance on the company's shares. This revision follows Starbucks' pre-announcement of fourth-quarter sales and earnings per share (EPS) after market close on Tuesday, which revealed lower comparable store sales and an adjusted EPS of $0.80. This figure notably fell short of both investor and analyst expectations.
The analyst from Guggenheim pointed out that Starbucks did not provide further details on profitability metrics, leaving it uncertain to what extent tax rates or costs below the store level contributed to the earnings miss. The pre-announcement strategy was noted as being shrewd, effectively distancing the subpar quarterly results from the forthcoming FQ4 conference call scheduled for next Wednesday.
During the upcoming call, Starbucks' new CEO, Brian Niccol, is expected to spend more time discussing his plans for turning the company around. In light of the recent financial disclosure, Guggenheim has also revised its 2025 EPS estimate for Starbucks to $3.40, down from the previous forecast of $3.75. The price target adjustment to $93 reflects an expanded multiple on these lowered estimates, with a projection extending into the year 2027 as part of the recovery framework.
In other recent news, Starbucks Corporation reported a decrease in its fourth-quarter sales, falling short of both Goldman Sachs and consensus estimates. The company also disclosed a 24% decrease in earnings per share from the previous year.
Despite these figures, Starbucks increased its quarterly dividend to $0.61 per share, marking a 7.0% year-over-year increase. Amidst the ongoing CEO transition and the current business climate, Starbucks has chosen to suspend its full fiscal year 2025 guidance.
Multiple analysts have adjusted their perspectives on the coffee giant. Goldman Sachs reaffirmed its Buy rating, while Deutsche Bank raised its price target from $118 to $120, maintaining a Buy rating. On the other hand, Citi lowered its target from $99 to $96, keeping a Neutral rating.
Starbucks is also facing calls for change from baristas and customers, with concerns ranging from understaffing and inadequate pay to the quality of coffee. This has led to escalating labor union actions across the United States. In addition, the company has announced the addition of two new coffee innovation farms in Guatemala and Costa Rica as part of its global coffee research efforts.
InvestingPro Insights
As Starbucks faces challenges highlighted in its recent pre-announcement, InvestingPro data provides additional context for investors. The company's market capitalization stands at $109.72 billion, reflecting its significant presence in the market. Despite recent setbacks, Starbucks maintains a strong position in the Hotels, Restaurants & Leisure industry, as noted by InvestingPro Tips.
The company's P/E ratio of 27.09 suggests that investors are still pricing in growth expectations, albeit at a level that may be high relative to near-term earnings growth prospects. This aligns with an InvestingPro Tip indicating that Starbucks is trading at a high P/E ratio relative to its near-term earnings growth.
On a positive note, Starbucks has demonstrated commitment to shareholder returns, having raised its dividend for 14 consecutive years and maintained payments for 15 years, according to InvestingPro Tips. The current dividend yield stands at 2.35%, which may appeal to income-focused investors.
It's worth noting that 7 analysts have revised their earnings downwards for the upcoming period, which correlates with Guggenheim's adjusted outlook and reduced price target. This information, along with 10 additional tips, is available on InvestingPro, offering investors a more comprehensive view of Starbucks' financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.