SBUX Gears Up for Q2 Earnings: What's in the Offing for the Stock?

Starbucks Corporation SBUX is scheduled to report second-quarter fiscal 2025 results on April 29, 2025, after the closing bell. In the last reported quarter, the company’s earnings surpassed the Zacks Consensus Estimate by 4.6%.

Trend in Estimate Revision of SBUX

The Zacks Consensus Estimate for fiscal second-quarter EPS has declined to 49 cents from 52 cents in the past 30 days. The expected figure indicates a fall of 27.9% from the year-ago quarter’s 68 cents per share. (See the Zacks Earnings Calendar to stay ahead of market-making news.)

The consensus mark for revenues is pegged at $8.79 billion. The metric implies a gain of 2.6% from the year-ago quarter’s figure.

Factors Likely to Shape Starbucks’ Quarterly Results

Starbucks’ fiscal second-quarter top line is likely to have benefited from contributions from net new company-operated store openings and menu simplification. Its focus on operational excellence, backed by a reinvention plan, bodes well.

During the first quarter of fiscal 2025, Starbucks swiftly realigned the business, mission and marketing efforts to reinforce its position as a premier coffee brand. The company reduced reliance on discount-driven promotions, resulting in a 40% decline in discounted transactions year over year. These efforts are likely to have aided the company’s performance.

Additionally, Starbucks has eliminated extra charges for non-dairy milk and customizations while identifying further steps to enhance pricing transparency for customers. As part of this effort, the company has launched its "Coffee Forward" marketing campaign in the United States. This is aimed at broadening its customer reach, which is likely to have driven the company’s performance.

Operational improvements are also at the forefront of the turnaround. Starbucks has been focused on optimizing both in-store processes and its overall supply chain, yielding notable efficiency gains. Enhanced partner stability and targeted investments in labor, technology and store operations are expected to have delivered long-term benefits.

SBUX’s fiscal second-quarter margins might have remained under pressure due to inflationary costs related to labor, raw materials and supply-chain inefficiencies. While operational improvements are expected to have partially offset these pressures, investments in partner wages might weigh on the company’s profitability. Our model predicts total operating expenses in the fiscal second quarter to rise 8.8% year over year to $5.3 billion.

What the Zacks Model Unveils for SBUX

Our proven model does not conclusively predict an earnings beat for SBUX this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is not the case here.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

SBUX has an Earnings ESP of -3.74% and a Zacks Rank #3 at present.

Stocks to Consider

Here are some stocks you may consider, as our model shows that these have the right combination of elements to beat on earnings this season.

CAVA Group, Inc. CAVA currently has an Earnings ESP of +0.87% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for first-quarter 2025 EPS is pegged at 14 cents, which implies a 16.7% increase year over year. The consensus estimate for CAVA’s quarterly revenues is pegged at $330.6 million, which indicates growth of 27.6% from the figure reported in the prior-year quarter. CAVA reported an earnings surprise of almost 62.6%, on average, in the trailing four quarters.

McDonald's Corporation MCD has an Earnings ESP of +0.06% and a Zacks Rank of 3 at present. In the to-be-reported quarter, McDonald's earnings are expected to register a 2.2% year-over-year decrease.

McDonald's earnings beat the Zacks Consensus Estimate in two of the trailing four quarters and missed twice, the average miss being 0.6%.

Caesars Entertainment, Inc. CZR currently has an Earnings ESP of +2.27% and a Zacks Rank of 3.

In the to-be-reported quarter, Caesars Entertainment’s earnings are expected to increase 70.9%. Caesars Entertainment’s earnings beat the Zacks Consensus Estimate in one of the trailing four quarters and missed on three occasions, the average negative surprise being 454.8%.

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This article originally published on Zacks Investment Research (zacks.com).

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