On Wednesday, Evercore ISI adjusted its financial outlook on Starbucks Corporation (NASDAQ:SBUX), reducing the coffee giant's price target from $120.00 to $92.00, while maintaining an Outperform rating on the company's shares. The revision follows Starbucks' fiscal second-quarter earnings report, which prompted the firm to revise its full-year earnings projections downward due to anticipated declines in same-store sales (SSS) and margins in the latter half of the year.
The firm's revised forecasts include a decrease in the expected earnings per share (EPS) for fiscal year 2024 from $4.02 to $3.59, which represents a modest 2% year-over-year increase, falling short of the consensus estimate of $4.00. For fiscal year 2025, the EPS estimate has been lowered from $4.72 to $4.00, equating to an 11% year-over-year growth, which is also below the consensus of $4.63.
The adjusted estimates reflect a more cautious outlook for Starbucks' performance in North America, with projected same-store sales declines of 3% in the fiscal third quarter and 1% in the fiscal fourth quarter, a significant shift from the previously expected 4% growth. The company has outlined strategies to counteract the negative traffic trends observed in both the U.S. and China, where same-store sales dropped by 7% and 4% respectively during the fiscal second quarter.
Despite the challenges, Evercore ISI remains hopeful for a recovery in fiscal year 2025, citing the potential for easier year-over-year comparisons and the impact of Starbucks' initiatives to improve performance. However, the firm's projections remain conservative, with an EPS growth model set below the anticipated 15% growth rate, aligning with Evercore ISI's expectation of an 11% increase in fiscal year 2025.
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