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Expect an Earnings Beat From Starbucks This Week

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Other names likely to beat expectations include Krispy Kreme, Bob Evans, and Chuy's Holdings

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We expect coffee giant Starbucks Corporation (NASDAQ:SBUX) to beat expectations when it reports first quarter fiscal 2013 results on Jan. 24 after the market closes.

Why a Likely Positive Surprise?

Our proven model shows that Starbucks is likely to beat earnings because it has the right combination of two key ingredients.

Positive Zacks ESP: Earnings ESP (Read: Zacks Earnings ESP: A Better Method), the difference between the Most Accurate estimate of $.58 and the Zacks Consensus Estimate of $.57, stands at +1.75%.

Zacks No. 3 Rank (Neutral): Starbucks currently retains a Zacks Rank No. 3 (Hold).

The combination of the stock's Zacks Rank No. 3 (Hold) and +1.75% ESP makes us confident of a positive earnings beat on Jan 24.

What Is Driving the Better-Than-Expected Earnings?

Starbucks' is gaining momentum with its strong market standing, new product launches, rapid growth in China, the flourishing channel development (CPG) business as well as the solid turnaround in its US business.

It delivered solid earnings results in the fourth quarter, beating both Zacks as well as company expectations. In fact the company has delivered positive earnings surprises in three of the past four quarters. Moreover, after announcement of solid fourth quarter results, Starbucks raised its forecast for earnings, operating margins, and global net new stores for fiscal 2013.

Most estimates were revised higher after announcement of the third quarter results and the upbeat outlook for 2013. The Zacks Consensus Estimate for fiscal 2013 grew 0.9% over the last 90 days reflecting year-over-year earnings growth of 20.3%. While that for fiscal 2014, went up 1.6% over the same timeframe, reflecting an earnings growth of 21.2%.

Starbucks has compelling growth drivers like La Boulange bakery products, Verismo at-home-coffee machine, Evolution Fresh juices, and K-Cups portion packs to sustain earnings momentum in the first as well as future quarters of 2013. Overall, Starbucks has a bright outlook for fiscal 2013, expecting continued robust consolidated operating margin and earnings improvement in the year ahead.

Other Stocks to Consider

Starbucks is not the only bullish firm this earnings season. We also see likely earnings beats coming from the following industry peers:

Krispy Kreme Doughnuts, Inc. (NYSE:KKD): Earnings ESP of +9.09% and Zacks Rank No. 1 (Strong Buy).

Bob Evans Farms Inc. (NASDAQ:BOBE): Earnings ESP of +3.90% and Zacks Rank No. 1 (Strong Buy).

Chuy's Holdings Inc. (NASDAQ:CHUY): Earnings ESP of +25.00% and Zacks Rank No. 2 (Buy).

To read this article on Zacks.com, click here.

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No positions in stocks mentioned.
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