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SBUX vs. DNKN: Which Coffee Stock Is Hottest Right Now?

Whether it be the morning cup on the way to work or the late-night homework cramming necessity, drinking coffee has become a daily routine for millions of people throughout the world. Coffee drinkers also tend to be a loyal bunch, meaning coffee makers face fierce competition in their efforts to win over customers.

The coffee wars are real, and as far as brick-and-mortar retail sellers go, there is no bigger rivalry than Starbucks SBUX and Dunkin’ Donuts DNKN. While these companies battle over hot beverage drinkers, investors are left wondering which the hotter stock is.

With SBUX’s recent earnings report still fresh in our minds, and as we prepare for DNKN’s report in the coming days, now is the perfect time to take another look at this coffee rivalry.

Starbucks Cooling Off?

Last week, Starbucks posted its second-quarter fiscal 2016 earnings results. While the company matched the Zacks Consensus Estimate for earnings at 39 cents, the stock slipped nearly 4% in after-hours trading as investors reacted to its sluggish global sales growth.

Breaking it down, Starbucks missed revenue expectations by about 0.5%, posting $4.99 billion in global sales against our consensus estimate of $5.017 billion. Comparable store sales grew by 6% year-over-year, compared to 8% growth in the previous quarter. Global traffic rose 2%, less than the 4% increase seen in the previous quarter.

Nevertheless, Starbucks saw some positive signs: Food sales climbed 16%, Tea sales grew 17%, and Mobile Pay saw an increase of 40%.

What To Expect From Dunkin’

Dunkin’ Brands is expected to release its latest earnings report on April 28. The current Zacks Consensus Estimate for earnings is 43 cents, and we expect the company to post revenues of $189 million. If Dunkin’ can match this revenue expectation, it would represent growth of 23.5% from the previous quarter.

For the full year, however, DNKN’s projected sales growth sits at 4.62%. Furthermore, in the past 60 days, we have seen four negative revisions for the company’s current quarter earnings versus just one on the positive side. This makes it difficult to predict a positive earnings beat in the upcoming report.

Of course, we should also mention Starbucks’ recent revision activity as well. In the same time frame, we have seen three negative earnings revisions for SBUX, against just one on positive revision. In other words, recent earnings trends are not showing good signs for either company.

The Right Cup

Overall, it is tough to make a definitive call between Starbucks and Dunkin’ right now. As mentioned, the earnings trends don’t point to a clear winner, and both companies currently have a Zacks Rank #3 (Hold).

The one edge we can point to is that Starbucks is currently clocking in with slightly better Style Score grades. SBUX currently holds a “B” in our weighted VGM average category, beating out DNKN’s lackluster “D” grade.

Regardless, investors should keep an eye on DNKN’s upcoming earnings announcement before choosing what coffee stock is the hottest right now.

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STARBUCKS CORP (SBUX): Free Stock Analysis Report
 
DUNKIN BRANDS (DNKN): Free Stock Analysis Report
 
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