Starbucks to Report Q3 Earnings: ETFs in Focus

Starbucks Corporation SBUX will report third-quarter fiscal 2020 results on Jul 28, after the closing bell. Let’s take a look at this coffee giant’s fundamentals ahead of its earnings release.

Starbucks delivered an earnings surprise of 3.2% in the last reported quarter and has outperformed the consensus mark by 3.9%, on average, in the trailing four quarters. The Zacks Consensus Estimate for third-quarter earnings has been revised downward over the past 30 days to a loss of 60 cents. The company had reported earnings of 78 cents in the prior-year quarter. The consensus mark for revenues stands at $4.13 billion, indicating a decline of 39.5% from the year-ago period’s figure. The stock has a VGM Score of D and belongs to a top-ranked Zacks industry (top 32%).

Coronavirus Impact to Show on Results

The coronavirus outbreak has largely impacted the consumer discretionary sector, which attracts a major portion of consumer spending. Major retailers, restaurants and hotels in the United States had to shut down operations domestically and abroad.

Also, the pandemic has resulted in some changes in the lifestyle and preferences of Americans. Most of the surveys have found that people are more interested in opting for online shopping rather than visiting a brick-and-mortar store for their purchases of essential food items and supplies. Even as the U.S. economy reopens in phases and social-distancing restrictions are being eased, people will try to minimize human-to-human contact.

In such a scenario, Starbucks also expects to see some impacts due to the outbreak on its earnings results. The company expects comparable store sales for the Americas and the United States to decline 40% to 45% in the fiscal third quarter.

Our Methodology

Our proven model doesn’t conclusively predict an earnings beat for Starbucks 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. But that’s not the case here.

Starbucks currently has a Zacks Rank #4 (Sell) and an Earnings ESP of 7.18%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

ETFs in Focus

Investors might want to take a look at a few consumer discretionary ETFs which have notable exposure to Starbucks (see: all the Consumer Discretionary ETFs here):

Consumer Discretionary Select Sector SPDR Fund XLY — 3.96% exposure to Starbucks

The fund tracks the Consumer Discretionary Select Sector Index and comprises 61 holdings. Starbucks sits at the sixth spot. The fund’s AUM is $14.47 billion and expense ratio is 0.13%. The fund has gained 8.1% year to date (read: Retail Sales Returning to Pre-COVID 19 Level: Best ETF Areas).

iShares Evolved U.S. Consumer Staples ETF IECS — 3.7% exposure

It is an actively-managed fund which employs data science techniques to identify companies with exposure to the consumer staples sector. The fund comprises 124 holdings, with Starbucks occupying the eighth spot. Its AUM is $9.8 million and expense ratio is 0.18%. The fund has lost 2% year to date (read: Coke, PepsiCo Earnings Should Help Staples ETFs).

Vanguard Consumer Discretionary ETF VCR — 2.6% exposure

This fund currently follows the MSCI US Investable Market Consumer Discretionary 25/50 Index. Starbucks takes the seventh spot. The fund’s AUM is $3.42 billion and expense ratio is 0.10%. The fund has gained 13.2% year to date (read: Will Coronavirus Vaccine Optimism Drive These ETFs?).

Fidelity MSCI Consumer Discretionary Index ETF FDIS — 2.4% exposure

This fund tracks the MSCI USA IMI Consumer Discretionary Index. Starbucks sits at the seventh spot. The fund’s AUM is $866 million and expense ratio is 0.08%. However, the fund has gained 16.3% year to date.

Soure: Nasdaq

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