US coffee chain operators Starbucks just revealed its earnings forecast for 2020. The company's expected earning unfortunately missed initial analysts forecast. Investors immediately reacted to the weaker-than-expected figures, sending the company's shares downward.
During Goldman Sachs' Global Retailing Conference on Wednesday, Starbucks's CFO Pat Grismer made a slideshow presentation revealing the company's outlook for the next year. The executive revealed during the presentation that Starbucks expects its earnings per share to be below its ongoing growth model.
In its guidance for its fiscal 2019, Starbucks is expecting its earnings per share to be between $2.80 and $2.82. Despite its weaker-than-expected forecast, Grismer assured shareholders than the company's long-term double-digit EPS growth plans were still on track.
According to Grismer, the outlook was taking into considering the significant headwind to the company's earnings growth in fiscal 2020 due to the one-time tax benefits realized in fiscal 2019. The CFO also stated that the company's decision to purchase $2 billion worth of shares in 2019 instead of 2010 played a part in the company's forecast.
Following the release of the company's forecast, Starbuck's shares dropped by as much as 3 percent in premarket trading. For the first six months of 2019, Starbuck's shares have increased by over 50 percent so far.
After reporting stellar third-quarter earnings in July, Starbucks previously raised its 2019 outlook. Its sudden release of a much weaker 2020 outlook had likely spooked some investors, who had expected much of the same forecast. Starbucks had previously told investors last year that it expects its earnings per share growth to be at least 13 percent in 2020.
Market analysts have assured that the weaker forecast should not really concern investors as Starbucks is still performing very well as evident in its recent performance reports. Starbucks still managed to hit its core operating business targets so far.
Overall revenue growth for the company was still in the 7 percent to 9 percent range, while its operating income growth remained in the 8 percent to 10 percent range. While the company's EPS growth may not hit double-digits in 2020, some analysts have forecasted that it will still be in the high single-digit range.
In response to questions regarding the company's plans to handle the economic slowdown and the ongoing trade dispute between China and the United States, Starbucks CEO Kevin Johnson shrugged off such concerns. The CEO explained during an interview last month that the recent economic and political developments have done little to hamper the company's performance so far.
