Starbucks (SBUX): What to Expect Before Earnings

2026-07-12 · By Lubin Danilo, founder of Lubin Investment

SBUX: see the full analysis on Lubin Investment

Starbucks reports third-quarter fiscal 2026 earnings on July 20, in the middle of its new CEO's turnaround attempt. My screener gives it only 5 out of 10 today: thin margins, high debt, and a stock that remains expensive despite these struggles. Here's what I'm watching before the announcement.

The context: a brand mid-turnaround

Starbucks has gone through several difficult quarters: declining foot traffic in some markets, lines considered too long, and criticized in-store experience. Management, led by a new CEO who came from another major fast-food chain, launched a turnaround plan centered on menu simplification, shorter wait times, and a return to a more polished in-cafe experience. This kind of plan usually takes several quarters before clearly showing up in the numbers.

What my screener says today: 5 out of 10, margins under strain

In my 10-criteria screener, Starbucks scores only 5 out of 10. The most telling number: a net margin of just 3.9%, a very low level for such a well-known brand. Free cash flow margin (money genuinely available after all expenses) comes in at 6.2%, also weak. Per-share profits (measured by free cash flow per share) have declined 10.4% a year on average over 5 years, and my margin criterion confirms ongoing pressure on profitability, consistent with the operational struggles mentioned above. Net debt reaches 5.73 times free cash flow, a level I consider too high given the operating flexibility it leaves the company.

The price: expensive despite the struggles

This is the point that deserves the most attention: the stock trades at 51.2 times its annual free cash flow (P/FCF), one of the highest multiples in my entire screener, even as fundamentals are under pressure. My model puts a reasonable buy price at $35.81, against a current price of $106.01, roughly a 66% premium. In other words, the market keeps paying a hefty premium for the brand and the turnaround bet, despite numbers that don't yet justify it.

What to watch in the July 20 results

Starbucks reports third-quarter fiscal 2026 earnings on July 20, after market close. Consensus expects earnings per share around $0.67. Key indicators to watch: same-store sales (growth at cafes open more than a year, the most closely followed metric for a restaurant chain), foot traffic trends, and above all any concrete sign that the turnaround plan is starting to stabilize margins rather than just stabilizing on paper.

• Starbucks reports Q3 fiscal 2026 earnings on July 20, mid-turnaround for the brand
• 5 out of 10 in my quality screener: net margin of only 3.9%, per-share profits declining 10.4%/yr
• High net debt (5.73 times free cash flow), a point of concern
• The stock trades at 51.2 times its available cash, a premium over 66% despite operational struggles
• Watch on July 20: same-store sales and concrete signs of margin stabilization

FAQ

Why does Starbucks score only 5 out of 10 in your screener?

Its net margin (3.9%) and free cash flow margin (6.2%) are weak for such a well-known brand, its per-share profits have declined for 5 years, and its net debt (5.73 times free cash flow) is high. Several criteria in my screener come in below the threshold I target.

Is Starbucks stock cheap after its recent decline?

Not according to my model: at 51.2 times its annual free cash flow, the stock still trades at a hefty premium, roughly 66% above my reasonable buy price of $35.81.

What is Starbucks' turnaround plan?

The group's new CEO launched a plan centered on menu simplification, shorter in-store wait times, and a return to a more polished cafe experience, after several quarters of declining foot traffic.

Should you buy Starbucks before its July 20 earnings?

Current fundamental quality is weak and the price remains high despite that. This is not personalized investment advice, do your own research.

SBUX: see the full analysis on Lubin Investment

About the author

Written by Lubin Danilo, founder of Lubin Investment. A self-taught individual investor, I find fundamental analysis fascinating, and it has delivered excellent results. For three years now, my performance has beaten the S&P 500. But analyzing every stock took too much time: sites with incomplete data, calculation methods and criteria never aligned with mine. And spotting the best stocks was just as time-consuming, even with my own well-defined checklist. So I put my software development background to work to build this software, base my investment strategy on its results, and share it with people who share the same passion as me. It judges a company's quality and its price separately, using criteria drawn from the financial literature (Warren Buffett, Michael Mauboussin, Aswath Damodaran).