Starbucks Earnings: Transaction Pressure Persists but Does Not Intensify for Coffee Stalwart

Wide-moat Starbucks posted soft fiscal third-quarter results, with $9.1 billion in sales and $0.93 in diluted EPS missing our $9.2 billion and $0.96 estimates, respectively. The firm's 2% comparable store sales decline in the US and 3% globally attest to the stout pressure facing restaurateurs in the current environment, with the combination of a broader consumer pullback and relatively subdued inflation in the grocery channel creating sizable industry headwinds. Ultimately, we don't expect the firm's current slate of operational initiatives to immunize it from these pressures, and forecast just 3.4% annual top-line growth in fiscal 2024 and 2025, only slightly ahead of our industrywide 2.9% prognosis. On balance, we expect little change to our $96 fair value estimate, leaving shares underpriced despite a 3%-4% rally in aftermarket trading.