Starbucks Raises Guidance on Solid Q3 Results

American multinational chain of coffeehouses Starbucks Corporation (SBUX) has reported stronger-than-expected fiscal third-quarter results on the back of growth in net revenues.

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Following the results, shares of the company declined almost 3% to close at $122.30 in the extended trading session.

The company reported consolidated quarterly net revenues of $7.5 billion, up 78% from last year, surpassing the consensus estimate of $7.2 billion. The robust growth in net revenues was primarily driven by a 73% rise in comparable store sales.

It reported earnings per share (EPS) of $1.01, which compares favorably with last year’s loss of $0.46. Further, it topped the consensus estimate of $0.77.

The company has also raised its guidance for Fiscal Year 2021. It expects EPS to be in the range of $3.20 to $3.25, compared to $2.90 to $3 earlier. The consensus estimate stands at $2.99.

In terms of revenues, the company has raised its guidance to $29.1 billion to $29.3 billion from $28.5 billion to $29.3 billion. It also expects comparable sales growth to be between 20% and 21%, compared to 18% and 23% earlier.

The CEO of Starbucks, Kevin Johnson, said, “Starbucks delivered record performance in the third quarter, demonstrating powerful momentum beyond recovery. Our ability to move with speed and agility and to be out in front of shifting customer behaviors has helped further differentiate Starbucks, positioning us well for this moment.” (See Starbucks stock chart on TipRanks)

On July 26, Stifel Nicolaus analyst Christopher O`Cull assigned a Buy rating to the stock. The analyst raised the price target to $135 from $124, which implies upside potential of 7.1% from current levels.

The analyst stated, “We also remain confident in the strength of the company’s international business and expect SRS slightly ahead of the Street’s 60% (Stifel 66%). As a result of the company’s expected domestic strength, our Americas operating margin (22.5%) is ahead of the Street’s 21.9%, though we are more cautious on the International segment (19.5%, Street 21.4%). With higher expected profitability due to the higher comparable sales, we raised our F3Q EPS estimate to $0.77 (from $0.72).”

Consensus among analysts is a Strong Buy based on 5 Buys and 1 Hold. The average Starbucks price target of $134.40 implies upside potential of 6.6% from current levels.

Starbucks scores a “Perfect 10” on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations. Shares have gained 68.9% over the past year.