Starbucks Corporation (SBUX) Q3 Earnings Preview 2013: Profits Look Set To Rise, As Store Sales Stay Strong – Likely Fourteenth Consecutive Quarter of Sales Gains

Starbucks Corporation (NASDAQ:SBUX) is expected to report a nearly 24 percent bump in its earnings per share for the second quarter, according to analysts polled by Thomson Reuters, as strong sales in Asia and the Americas offset weakness in Europe.

The Seattle cafe giant reports third-quarter earnings late Thursday afternoon, at 4 p.m. EDT, after markets close. It’s expected to report profits of $403 million and earnings per share of $0.531, up from $333 million and $0.430 a year ago. Revenues will reach $3.71 billion, up 12.5 percent from the same quarter in 2012, according to the analysts polled by Thomson Reuters.

Starbucks has seen consistently strong sales in the past quarter, with especially healthy sales in the United States, said William Blair & Co. analyst Sharon Zackfia.

“What’s kind of amazing with Starbucks is the sheer resilience and consistency of their sales trend,” Zackfia told the International Business Times. She pointed to the company’s record of 13 straight quarters of global sales growth over 5 percent.

“There’s a high bar,” she said, citing a strong performance in recent months as heightening expectations. “But the good news is: I think they’re going to deliver.”

Barclays’ (LON:BARC) analysts forecast 15 percent revenue growth for the latest quarter, with strong sales in the Americas and Asia compensating for slightly lackluster sales in Europe, the Middle East and Africa.

Barclays analysts wrote in their Starbucks earnings preview from mid-July that Starbucks' steady growth in sales still outpaces sales growth in the rest of the industry.

“We are raising estimates as comp [comparable sales] growth remains industry-leading,” wrote the Barclays analysts. “We believe momentum was sustained through the quarter.”

Even with a slight slowdown in Starbucks’ China business this past quarter, sales there are still healthy, said Zackfia. Per-store profits in China are higher than in any other country Starbucks operates in, she said, because of low labor and building occupancy costs there.

Chinese Starbucks branches tend to pay for themselves within the first year of operations, compared with a two-year payback for U.S. stores, she said.

Morningstar Inc. (NASDAQ:MORN) analyst R.J. Hottovy also cited a spending rebound among affluent consumers, evidenced in strong sales by the Chipotle Mexican Grill Inc. (NYSE:CMG) restaurants, as also boosting Starbucks in the latest quarter.

Downsides for Starbucks in the past three months include a sluggish European market, where corporate inefficiency and waste combined with an unhappy regional economy have contributed to low regional revenues and profits.

“In Europe – they’ve had some issues there,” said Hottovy. “Part of it is macro-related, but there are some self-inflicted wounds, too.”

He compared Starbucks’ European situation, where revenues have lagged in the past six months, to what their U.S. stores faced about four years ago. There’s a “lot of room for improvement on operating efficiencies and reduced waste, simple operational things,” he said.

For Hottovy, the company’s greatest challenge is to manage an ambitious expansion on several fronts, all at the same time.

“One major risk is that they’re juggling a lot of balls right now, whether it’s broadening their specialty coffee space, getting into other food and beverage products, integrating acquisitions or international expansion,” said Hottovy.

There were 18,868 Starbucks branches open worldwide as of March 31, 2013, according to the company’s second-quarter filings, with the most by far in the Americas.

In its last fiscal quarter, Starbucks reported revenues of $3.6 billion and operating income of $549 million. Company observers will also be watching as Starbucks releases its initial guidance for its fiscal 2014 on Thursday.

The company's latest expansions into Southeast Asia, and its new emphasis on tea and food, haven't yet matured enough for any material impact on company earnings, said analysts.

But even for those wary of the management's packed agenda, the company is remarkably healthy, and hasn't faced major mistakes or obstacles in recent months. An optimistic Hottovy pointed to excellent executive management under longtime CEO Howard Schultz.

“My take is that it’s probably been a pretty strong quarter for them,” he said.