Starbucks Analyst Days Are Generally Not Market-Moving Events, But ...

Starbucks Corporation (NASDAQ: SBUX) is scheduled to host its Analyst Day on Wednesday. While investors are focusing on gaining an insight into the company’s ability to sustain Americas comps at 5 percent over the medium term, shares are likely to respond to any announcement of increased share repurchases, Cowen’s Andrew M. Charles said in a report.

Charles maintains an Outperform rating on the company, with a price target of $66.

Comps, EPS Growth

The focus of the Analyst Day will likely be learning about the drivers to reach and sustain 5 percent Americas comps, which would be comprised of 1 percent from beverage innovation, 1–2 percent from food innovation and 1 percent from Teavana.

“This implies a 1–2 percent contribution from traffic that will be critical to prove reacceleration as the April shift in the MSR structure sacrifices at least 1 percent of traffic for mix growth,” Charles wrote.

Apart from comps, it would be interesting to know how Starbucks plans to return to the midpoint of 15–20 percent EPS growth in 2017, given the sales and labor headwinds. The company’s EPS growth could be backed by “more efficient G&A, increased share repurchases and high-flow thru of CPG licensed sales,” the analyst mentioned.

Share Repurchases

Adding debt to repurchase shares would help Starbucks return to its long-term 15–20 percent range for EPS growth in FY 2018, Charles mentioned. If the company were to spend $5.2 billion in share buybacks from Q2 2017 to Q1 2018, this could be accretive to its 2018 EPS by $0.07.

At last check, Starbucks shares were up 0.75 percent at $57.64.