What's Brewing for Starbucks After Mixed Q4 Earnings? ETFs in Focus

Starbucks SBUX reported mixed fourth-quarter fiscal 2025 results on Oct. 29 after market close. Its earnings missed the Zacks Consensus Estimate, while net revenues beat the same. The top line increased year over year but the bottom line declined from the prior-year quarter’s figure.In the fiscal fourth quarter, the company reported the progress of its “Back to Starbucks” turnaround strategy, citing a return to global comparable sales growth and improving momentum. Starbucks CEO Brian Niccol, as quoted on Reuters, noted that the company will take a measured approach to pricing next year and does not anticipate broad menu price increases. The quarter signals a positive shift for Starbucks’ U.S. operations.Starbucks shares fluctuated following the earnings release, after an initial 1.7% drop in early trading. The shares of the coffee chain giant rose 3.9% before reversing course to end the day down 1.21% on Oct. 30. The world’s largest coffee house chain currently has a Zacks Growth Score of B but has a Zacks Rank #3 (Hold).Breaking Down EarningsFor the fiscal fourth quarter, the company reported earnings per share (EPS) of 52 cents, missing the Zacks Consensus Estimate of 55 cents by 23.1%. The bottom line also decreased 35% from 80 cents reported in the prior-year quarter.Net revenues of $9.57 billion beat the consensus mark of $9.33 billion by 2.6%. The reported value was up 5.5% from $9.1 billion reported in the prior-year quarter. Global comparable store sales increased 1% year over year. The upside was backed by a 1% increase in comparable transactions.Starbucks reported 107 net store closures in the fiscal fourth quarter, bringing the total count to 40,990 stores.The company’s non-GAAP operating margin contracted 500 basis points (bps) to 9.4% from the prior-year quarter, primarily due to restructuring costs tied to store closures and the streamlining of its support organization. The margin pressure was also caused by inflationary factors, increased labor investments under the “Back to Starbucks” initiative and overall operating deleverage.Segmental Earnings BreakdownThe net revenues for the company’s North America segment were $6.9 billion, up 3% year over year. Operating margin contracted 1420 bps to 4.5% from 18.7% in the prior-year quarter. Our model expected this segment’s operating margin to be 14.3% in the quarter.The international segment’s net revenues of $2.07 billion increased 9% year over year. Operating margin contracted 410 bps year over year to 10.8% due to heightened promotional activity and store closures. We expected this metric to be 10.3% in the quarter.Coffee Costs RiseAccording to the abovementioned Reuters article, Starbucks’s management warned that rising coffee bean prices could weigh on performance for the next couple of quarters. After soaring 70% in 2024, arabica coffee prices are up another 20% this year, fueled by supply shortages linked to climate challenges and geopolitical tensions.Starbucks’s Stock OutlookStarbucks currently has an average brokerage recommendation (ABR) of 2.23 on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations made by 37 brokerage firms. The current ABR compares to an ABR of 2.19 a month ago, based on 35 recommendations.Of the 37 recommendations deriving the current ABR, 16 are Strong Buy and two are Buy. Strong Buy and Buy, respectively, account for 43.24% and 5.41% of all recommendations. A month ago, Strong Buy made up 45.71%, while Buy represented 5.71%.Based on short-term price targets offered by 31 analysts, the average price target for Starbucks comes to $94.74, with forecasts ranging from a low of $65.00 to a high of $117.00. Currently, SBUX stock is priced at $83.15 (as of market close on Oct. 30), with the average price target representing an increase of 13.94% from the last closing price.ETFs to ExploreInvestors wanting to monitor the coffee house chain can consider the following ETFs with exposure to the company.Tremblant Global ETF TOGA has an exposure of 2.69% in SBUX.Capital Group Dividend Value ETF CGDV has an exposure of 2.5% in SBUX.Consumer Discretionary Select Sector SPDR Fund XLY has an exposure of 2.27% in SBUX.iShares U.S. Consumer Focused ETF IEDI has an exposure of 1.55% in SBUX.Global X PureCap MSCI Consumer Discretionary ETF GXPD has an exposure of 1.54% in SBUX.Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Starbucks Corporation (SBUX): Free Stock Analysis Report Consumer Discretionary Select Sector SPDR ETF (XLY): ETF Research Reports iShares U.S. Consumer Focused ETF (IEDI): ETF Research Reports Capital Group Dividend Value ETF (CGDV): ETF Research Reports Global X PureCap MSCI Consumer Discretionary ETF (GXPD): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks