Why Starbucks Stock Popped Wednesday Morning
Key Points
The "Back to Starbucks" turnaround strategy is driving growth.
The company beat expectations and raised its guidance for the current fiscal year, delighting shareholders.
There's still work to do, and the stock isn't cheap, but Starbucks is making notable progress.
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Shares of Starbucks (NASDAQ: SBUX) charged out of the gate on Wednesday, surging as much as 10.3%. As of 1:45 p.m. ET, the stock was still up 8.3%.
The catalyst that sent the coffee purveyor higher was the company's financial results, which suggested its turnaround has reached a tipping point.
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Results as hot as its coffee
Starbucks has been embroiled in a turnaround over the past several years, and the results of the company's fiscal 2026 second quarter (ended March 29) show that its efforts are taking hold. Revenue of $9.5 billion jumped 9% year over year.
The results were driven by impressive comparable store sales (comps), which increased 6.2%, with transactions up 3.8% and average ticket up 2.3%. Solid comps helped fuel bottom-line growth as well, as the company's adjusted earnings per share (EPS) of $0.50 rose 22%.
For context, analysts' consensus estimates called for revenue of $9.2 billion and adjusted EPS of $0.44, so Starbucks surpassed both benchmarks with ease.
The company's turnaround efforts, dubbed "Back to Starbucks," were producing results across the board, as the company generated positive comps in all 10 of its largest international markets. This marked the first time Starbucks has achieved this in nine quarters.
CEO Brian Niccol acknowledged there was still "more work to do," in keeping with Starbucks' plan to first boost top-line growth, before turning its focus to improving profits.
Perhaps the biggest surprise was the increase in management's fiscal 2026 outlook. Starbucks is now guiding for U.S. and global comps of 5% or higher, up from its 3% forecast issued just three months ago.
At 36 times next year's expected earnings, Starbucks stock is a bit pricey. However, if the company's turnaround continues to produce results, its valuation should equalize soon enough.
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Danny Vena, CPA has positions in Starbucks. The Motley Fool has positions in and recommends Starbucks. The Motley Fool has a disclosure policy.
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