Things That Stood Out In Starbucks' Q4 Report

Analysts at Stephens continue to see the downside case for Starbucks Corporation SBUX after the company reported fourth-quarter results.

Analyst Will Slabaugh maintains an Equal-Weight rating on Starbucks' stock with an unchanged $52 price target, which implies further downside from the $53.93 shares were trading at early Friday morning.

Starbucks reported same-store sales growth of 3 percent in the Americas segment, which fell short of the 4 percent growth the analyst was expecting and the 3.3 percent consensus estimate, Slabaugh said in a report. Downside can be attributed to various ongoing issues around throughput given recent menu innovation and complexity in some items. In addition, slowing retail traffic played a role in the same-store sales miss as did the recent hurricanes although to a lesser extent.

What's Ahead?

Looking forward, Starbucks' management will be working on improving its personalized marketing message and continue innovating its menu item in the Americas business. Success in this regard is "crucial" for the company to re-accelerate its top-line growth and maintain positive traffic trends.

On the positive side, Starbucks' performance in China was strong and highlighted by an 8 percent same-store sales growth, the analyst wrote. But this may be overshadowed by management's revision of its long-term earnings per share guidance to the downside. Specifically, management now expects to grow its EPS by just over 12 percent and expects to earn $2.30 to $2.33 per share in the full-year fiscal 2018 versus the consensus estimate of $2.35 per share.

Starbucks' long-term opportunity and brand remain strong but investors may want to consider waiting for a "better entry point and await sustained improvements on the top and bottom-lines" before buying the stock, the analyst concluded.

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