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RBC Sees Starbucks Returning To 5% Comp Growth In The Americas

RBC Sees Starbucks Returning To 5% Comp Growth In The Americas
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Meetings with Starbucks Corporation (NASDAQ: SBUX) management increase confidence in the company returning to 5 percent comp growth in the Americas in 4Q, RBC Capital Markets’ David Palmer said in a report. He maintained an Outperform rating on the company, with a price target of $68.

Improving Execution To Drive Comp Growth

Analyst David Palmer mentioned that meetings with management highlighted three factors that had resulted in Starbucks achieving only 4 percent SSS in the Americas in F3Q. These are:

  • A slowdown in the My Starbucks Rewards adoption rate and mobile usage growth, with consumers getting acclimated to the new app
  • Increased consumer uncertainty
  • A mis-execution of the Frappuccino happy hour

Related Link: Starbucks Is Outperforming Peers In The "Oligopolistic Premium Grocery Coffee Market"

Management noted that of the three factors, only macro uncertainty was beyond its control. Palmer expects the negative effects from the new Rewards app to continue to fade, while other digital marketing efforts would likely bolster sales. He added, “In short, the company sounded confident that with improved execution it would hit its 5% target for F4Q.”

Expectations For 2017

The EPS estimate for 2017 has been reduced from $2.20 to $2.15. The analyst cited the reason for the lowered estimate as being “more conservative as the company continues to make partner wage investments and laps a 53-week year (2pp headwind).” He forecasted 8 percent revenue growth and 13 percent EBIT growth.

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Latest Ratings for SBUX

Oct 2016RBC CapitalMaintainsOutperform
Sep 2016WedbushMaintainsOutperform
Sep 2016CLSAMaintainsBuy

View More Analyst Ratings for SBUX
View the Latest Analyst Ratings

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