Last Friday, high-end coffee chain Starbucks Corp (NASDAQ: SBUX) reported its fiscal 2016 fourth-quarter results that beat analysts’ estimates. However, the investors were concerned about the US same-store-sales growth of 4% that missed the market’s expectation of 4.9% growth. Still, considering the 16.2% and 22.8% growth in the top line and bottom line, respectively, on a y-o-y basis, we believe that the stock has little chance of declining further. As explained below, the impressive Q1 2017 earnings view and the FY17 same-stores sales view is also expected to boost the share price in the current quarter. On Monday, the last traded price of Starbucks was $54.49.
The Washington-based company reported an increase in the fiscal 2016 fourth-quarter revenue to $5.711 billion, from $4.915 billion in the similar quarter of 2015. The Wall Street analysts were anticipating revenue of $5.68 billion.
In the fourth quarter ended September 2016, the company reported earnings of $801 million or $0.54 per share, compared to $652.50 million or $0.43 per share in the fourth quarter of fiscal 2015. On an adjusted basis, the 4Q 2016 earnings of $0.56 per share surpassed the Street’s estimates of $0.55 per share.
The comparable store sales in the Americas grew 5%, while it increased 6% in China. This compared to the market’s expectation of 4.9% and 5.5% same-store sales growth respectively in the Americas and China. As mentioned earlier, the same-store sales growth in the US was below the market’s expectations. Starbuck’s CEO Howard Schultz blamed the US Presidential election for the marginally lower same-store sales growth. Schultz further stated that post-election, he expects the consumers to return to their normal behavior.
For the first quarter, the company anticipates earnings of between $0.50 and $0.51 per share, which reflects an appreciation of between 9% and 11% from the corresponding quarter of fiscal 2016.
Starbucks anticipates a double-digit rise in the fiscal 2017 revenue. The analysts’ revenue expectation currently stands at $23.1 billion. The estimates can be exceeded, even if the company realizes a 10% increase in revenue from 2016. For full-year 2017, Starbucks forecasts earnings in the range of $2.12 to $2.14 per share. So, considering the impressive Q4 results and the optimistic fiscal Q1 2017 and full-year 2017 view, we anticipate the stock to remain bullish in the current quarter.
The stock made a sharp bullish reversal last Friday. The stochastic oscillator has started rising out of the bearish zone, thereby indicating a strong uptrend in the stock.
So, considering the high probability of an uptrend, a one-touch call option would be suitable to trade at this point in time. The strike price for the call option should be near the next major resistance level of $56. The trader should ensure that the call option remains valid at least until the 7th of December.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
