Goldman Picks Starbucks as 'Top Pick' into Earnings

Analysts at Goldman Sachs chose Starbucks Corporation SBUX as its top pick in restaurants heading into earnings. Honorable mentions: Dunkin Brands Group Inc DNKN and McDonald's Corporation MCD, which the firm also said should perform well into the reports.

On the industry as a whole, Goldman said that it is looking at three main factors. First, Goldman said it hopes to gauge macro impacts on the "low-income consumer," which include wage acceleration and lower gas prices. Second, the analysts are focused on risks of wage inflation from accelerating minimum wage increases in 2015 and 2016. Third, Goldman argued that it does not expect the foreign exchange headwinds to carry over much, noting that its largest revisions were just of $0.01 per share for all of 2015.

For Starbucks, which is trading at a 52-week high following its 2-for-1 stock split, Goldman outlined four key areas of focus in the quarter. First, the analysts said they hope to understand "the cost of employee ‘investments,'" which includes a better quantitative understanding of Starbucks' employee benefits. The analysts also highlighted depressed coffee prices and how it might flow through to the bottom line. Third, while it may be too early for numbers, Starbucks should comment on its mobile ordering program. Finally, Goldman said that it expects Starbucks to comment on the European Union's tax investigation and its potential for liability.

Given that, Goldman expects Starbucks to move to $53.50 in the next 12 months, up 10 percent from a post-split price at $48.50. Starbucks is scheduled to report earnings on April 23 following the close.