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Starbucks reports after the bell, and major analysts want clarity on China before they say 'buy'

Starbucks CEO Kevin Johnson gestures while speaking during the Starbucks annual shareholders meeting at McCaw Hall on March 21, 2018 in Seattle, Washington.
Stephen Brashear | Getty Images

Analysts are focused once again on whether China and international growth will cool off Starbucks shares as it heads into its fourth-quarter earnings report after the bell Thursday.

Starbucks rallied more than 13 percent in the past three months, shaking off a broad decline on the S&P 500, to get back within range of record highs. Shares of the company are down about 1 percent on Thursday.

The company updated its international growth plans at its investor day last month. Some analysts want more clarity on China, since recent data show the country's economic growth is stalling.

KeyBanc's Eric Gonzalez noted, "We expect few surprises as it relates to SBUX in China this quarter," while UBS' Dennis Geiger said, "China headwinds could be a drag on F1Q."

Here's what else analysts expect:

Goldman Sachs - Neutral rating

"We forecast U.S. comps of 4%/EPS of $0.65, both in-line with consensus, and, following a mid-December investor event that reaffirmed guidance, do not expect an update to F19 guidance for EPS of $2.61-$2.66 (versus our forecast of $2.66 and consensus of $2.65). ... Barring a surprise on U.S. comps, we expect shares will react primarily based on: Leading indicators for F2Q trends, where we see some room for concern ... China comps where investors appear braced for softness; however, a negative result could limit longer-term investors willingness to buy on any softness. (We forecast flat CAP comps versus consensus of 1.5%) ... Gift cards a minor factor for the quarter, but commentary could shape 1Q expectations. ... We have also received incoming questions on the specific risks of the government shutdown, which we view as relatively contained..."

UBS - Buy rating

"Expect US momentum maintained & China headwinds could be a drag on F1Q. The primary focus for F1Q earnings on 1/24 will be: i) whether US/Americas comp momentum was maintained following F4Q's 4%, and ii) China results amid a challenging competitive and macro/political backdrop. We model 4% F1Q Americas sss vs. Consensus 3.3%, incl 4% ticket & flat traffic. China expectations are lower following LT guidance for 1-3% sss, & we model 1% CAP (China-Asia Pacific) segment sss given recent headwinds. With shares up ~30% since June, investor sentiment has turned more negative. We believe shares have greater upside if the US can deliver 3-4% sss, China comps stay positive, & EPS can exceed +10% LT & position SBUX as still one of highest quality growth companies in large-cap consumer."

KeyBanc - Overweight rating

"Focus areas for F1Q19 results: With F1Q results, we will be most interested to hear: 1) how SBUX has improved its holiday execution and what it could mean for its future innovation efforts; 2) whether slowing macros have impacted results in China or whether consumers have shown signs they are shifting preferences away from premium brands like SBUX; and 3) the growth rate of active Rewards members and whether new digital relationships have begun to drive incremental visits ..."

Cowen - Market Perform rating

"We expect the call to deliver a similar message as December's investor day. The most important metric in the release is Americas comps, given a historical +0.84 correlation between comp expectations and SBUX's forward P/E multiple. ... We are raising our 1Q estimate for America's comps to 4% (from 3%), above Consensus Metrix of 3.3% and in-line with recent investor conversations. ... We were pleased to see the company take advantage of scale and run a Holidays 2018 TV advertising campaign that was not utilized in 2017. ... Additionally, Starbucks cited an improving afternoon business in fiscal 4Q, and we note the company continued Happy Hour afternoon promotions in 1Q following the platform's March 29, 2018 launch. ... Further, we note the annual Starbucks for Life promotion shifted a week earlier in 2018, from 12/5/17 - 1/8/18, to 11/28/18 - 12/31/18. ... Further, we cite geopolitical risk that could hurt a premium positioned brand like SBUX more so than quick service names like McDonald's and KFC that could benefit from trade down ..."

Telsey- Market Perform rating

"We project 1Q revenue at $6.43B (street $6.48B), consolidated SSS up 2.6% (street 2.8%), and EPS at $0.64 (street $0.65, guidance "at or slightly below $0.65"). ... This is the company's first earnings report following its mid-December Investor Day in which management not only reaffirmed its previous fiscal 2019 outlook and guidance, but also updated its longer-term plan. ... Along with the company's 1QF19 earnings results, we will be watching for: incremental details to its fiscal 2Q (Mar) expectations; any updates to recent SSS trends (especially in its key US and China markets); additional color on the company's sales-driving initiatives including technology and 3rd party delivery; segment revs and margin trends especially in the Americas and CAP segments; and any tweaks to fiscal 2019 guidance (Sep) or its longer-term outlook. ... Fiscal 2019 guidance previously included: add ~2,100 new global stores; global SSS "near the lower-end of 3-5%" (TAG 2.8%, street 2.9%); consol. revenue growth of 5-7%; and non-GAAP EPS of $2.61-2.66 (TAG $2.64, street $2.65) ..."

Wedbush - Neutral rating

"For FQ1, we expect EPS of $0.65 and Americas SSS growth of 3%. ... Consensus is also for EPS of $0.65 on 3% SSS growth in the Americas. ... Checks point to FQ1 SSS growth of at least 3%. ... Our FQ1 checks point to U.S. SSS growth in the low- to mid-3% range. ... Mobile ordering and marketing were the primary callouts of strength. ... While we believe there is a chance for a rounded up 4% comp, the most likely outcome is 3%, in our opinion. ... Believe drivers of 3%+ U.S. SSS growth in FY19 exist, but consistent execution needed. ... We continue to view new digital initiatives, such as the ability to take advantage of mobile pay without being a loyalty member, as an incremental 1-2% SSS growth opportunity in FY19. ... A YoY step-down in net unit growth should also add another layer of comp as cannibalization declines. ... With the recently announced UberEats delivery partnership and a remodel plan for 1/3 of the U.S. footprint to also start contributing as the year progresses, we view the consensus expectation of a 3% Americas comp as realistic. ... Remain somewhat cautious on China. We continue to believe SSS growth could inflect in FY19 towards the high end of 1-3% guidance, particularly as delivery begins to contribute (now available in >2000 units since launching in September). ... Nevertheless, we remain cautious given near-term headwinds surrounding China, including cannibalization, increasing competition, and a slowing economy. ... We model 1% China SSS growth in FQ1 vs. consensus of 1.6% ..."