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Starbucks' Earnings Report Could Move This Stock

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Coffee giant Starbucks (NASDAQ: SBUX) is set to report earnings Thursday after the bell. Analysts are expecting earnings per share of $0.57 on revenue of $3.8 billion.

Will Slabaugh, Starbucks analyst at Stephens, has an Overweight rating on the company and a $60 price target.

“We continue to recommend SBUX here and think there is a high likelihood that the company will post upside to consensus same-store sales and EPS estimates,” Slabaugh told Benzinga.

Benzinga previewed Starbucks' earnings extensively on Wednesday.

While Starbucks' earnings results will no doubt have an effect on its own shares, there's one other company in particular that could have a huge move off the report.

That company is Green Mountain (NASDAQ: GMCR).

Shares of Green Mountain were up more than 7 percent at one point on Thursday. There was largely no reason to explain the move.

Instead, investors might be looking ahead to one detail from Starbucks' earnings report: How did the Verismo perform?

The Starbucks Verismo first went on sale last quarter, and investors should anticipate some color on how the device has been performing. Like Green Mountain's staple Keurig brewer, the Verismo is a single-serve coffee machine.

Starbucks has a business relationship with Green Mountain, so it has continually stressed that the two devices are aimed at different markets. But that hasn't stopped investors from projecting Verismo strength as a sign Keurig weakness.

If Starbucks characterizes Verismo sales as outperforming, traders might anticipate that Green Mountain shares will slump.

However, if Starbucks indicates that Verismo sales have been sluggish, there could be a surge in Green Mountain's share price. Particularly as the company faces a heavy short interest -- about 27 percent of outstanding shares have been sold short. The effect of such a high short interest can be seen in shares of Netflix (NASDAQ: NFLX), which surged about 40 percent on Thursday after the company reported better than expected earnings.

Slabaugh isn't expecting a lot from the Verismo -- at least not yet.

“It's going to be tough for them to hold market share in the near term, given the multiple, cheaper private-label k-cups in stores recently...Verismo checks are mixed. Not confident on its success yet.”

Shares of Starbucks traded near $54 on Thursday, while Green Mountain hovered near $43.50.

Latest Ratings for GMCR

DateFirmActionFromTo
Oct 2014Bank of AmericaNeutral
Oct 2014Goldman SachsInitiates Coverage onBuy
Aug 2014Canaccord GenuityMaintainsBuy

View More Analyst Ratings for GMCR
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Posted-In: Analyst Color Earnings News Guidance Intraday Update Analyst Ratings Movers Trading Ideas Best of Benzinga

 

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