Starbucks Corp (NASDAQ:SBUX) Earnings Model
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Starbucks Modeling Approach
Revenue Modeling Approach: This model uses estimates of new stores and revenue per store by geographic region to project future revenue.
Expense Modeling Approach: We use Operating Margin estimates for each region to back into the operating expense line items: Store Operating Expense, Other Operating Expense, and general & Admin Expense using the prior quarter’s allocation. We use historic averages to estimate Interest & Other Income, and apply an effective tax rate to the future projected income to forecast the Provision for Income Tax.
Non-GAAP Adjustments: Starbucks does not report significant non-GAAP items other than amortization of acquired intangibles related to Starbucks Japan.
Share Count Forecast: To forecast the future share count we calculate the historic change in share count, after removing the impact of share repurchases. We then make estimates for future share repurchase volume and prices, and deduct the resulting share reduction in our forecast periods.
Balance Sheet & Cash Flow Modeling Approach: We use operating ratios to project the primary accounts on the Balance Sheet, and Balance Sheet changes and earnings estimates to forecast the Cash Flow Statement.
Valuation Approach: We utilize two valuation methods: A Market Multiple-based approach, and a Discounted Cash Flow (DCF) valuation. We apply a Price-Earnings Multiple to the Next Twelve Month consensus EPS estimate, on an exCash basis. Our DCF is based on a two-stage approach which discounts the company’s expected cash flows using our estimate of the Weighted Average Cost of Capital.
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