Starbucks (SBUX) shares have sprinted 18% higher since the start of the year, trouncing the S&P 500’s 4% gain. Behind the rally sits a straightforward narrative: Brian Nicoll, a year and a half into the chief executive job, is finally coaxing customers back into stores.
The fiscal first quarter offered the first clear evidence. Comparable‑store sales climbed 4% globally, and U.S. transactions turned positive for the first time in eight quarters. Nicoll has said the recovery is moving faster than he expected, even as margins remain pinched. “First, turn around the top line, and then earnings growth will follow,” he told investors.
Now the spotlight shifts to April 28, when Starbucks reports second‑quarter results. The market is pricing in progress. The question is whether the numbers will justify the enthusiasm.
Wall Street expects second‑quarter revenue of $9.3 billion, a 5.4% increase from a year ago, and earnings of $0.43 a share. Given the first‑quarter momentum and management’s January update that trends held steady, a beat‑and‑raise is plausible.
But the real test lies beneath the headline figures. Comparable sales growth can be propped up by price increases. Transaction growth cannot. In the first quarter, a 3% rise in U.S. company‑operated store transactions drove the bulk of the comp gain—a signal that more customers are walking through the door, not just paying more for the same latte.
If that transaction trend persists into the second quarter, Nicoll’s comeback blueprint will have a sturdier foundation. If it falters, the narrative gets shakier.
Even if the April 28 report impresses, the stock’s valuation demands a longer pause. Starbucks trades at roughly 82 times earnings. For a mature consumer business that isn’t growing at a gallop, that multiple leaves little room for error.
Long‑term income investors can point to a 2.5% dividend yield and a brand moat that hasn’t disappeared. But for anyone hoping to trade around the earnings print, a good deal of recovery optimism already appears baked into the share price.
The second‑quarter release is a midterm exam for Nicoll’s overhaul. A passing grade suggests the coffee is finally warming up. A stumble, and the stock may cool off faster than a forgotten Americano.
