Analyst Note| Sean Dunlop |
Wide-moat Starbucks reported fiscal 2023 first-quarter earnings in line with our forecasts, with diluted EPS of $0.74 and consolidated revenue of $8.71 billion close to our $0.73 and $8.73 estimates, respectively. There were, however, regional discrepancies, with results in North America outrunning our expectations on a surprisingly resilient core customer, but with China posing a worse-than-foreseen drag. On a net basis, we expect to lower our $106 fair value estimate by a low-single-digit percentage, leaving shares slightly expensive despite a pullback of similar magnitude in after-market trading. We also plan to raise our Morningstar Uncertainty Rating for Starbucks to High from Medium, consistent with our quantitative methodology.