Coffee king Starbucks Corp. (NASDAQ: SBUX) is one of the myriad companies posting earnings today, as it is slated to release its third-quarter earnings report after the closing bell this afternoon. Analysts expect the company to report earnings of 19 cents per share, excluding special items. Such results would outpace the firm's year-ago earnings by three cents per share.
The company is expected to post these earnings in the face of the recession, as cost cuts and store closures are thought to have insulated the company's profits. The results will also be closely monitored to see the impact of the company's main competitors -- which includes McDonald's Corp. (NYSE: MCD).
Starbucks is trying to win customers back from its fast-food rivals by cutting prices and even announcing that some stores will sell beer. Nevertheless, the company is going to have to do a lot more than offer $2 iced drinks in the afternoon to help it keep customers from migrating to McDonald's. At last check, the coffee offerings were still overpriced -- and this reporter feels that iced coffee is a tad disgusting.
Technically, what could stronger-than-expected earnings do for SBUX? The equity's 20-month moving average looms directly overhead, ready to squash any rally attempts. The last time SBUX managed to trade above this trendline was in early 2007, which was the last time the stock closed above the 20-month moving average. I am not blind, I can see that the stock has started to march northward a bit, but it has to sustain this move to win over bears (like me). With the stock enjoying a bit of support form its 10-month trendline, it is possible that solid earnings could serve to push the shares higher.
Of course, it is possible for disappointing earnings to send the shares spiraling lower.
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