Good Wednesday morning from Yahoo Finance's New York City headquarters studios. I'm Yahoo Finance executive editor Brian Saz. You can see the opening bells on Wall Street doing their thing.Ring, ring, ring. But today isn't about who is ringing opening bells on Wall Street. Believe it or not, the only two things that matter to the lives of investors today right at this very moment are this one.Will the Fed cut interest rates again later today. And if they do, is it because they are worried about the outlook ...

Core Viewpoint - Coca-Cola is positioned as a superior income investment compared to Starbucks, despite both companies currently offering identical dividend yields of 2.9% [7]. Company Overview - Coca-Cola has a market capitalization of $300 billion and a current stock price of $69.71, with a gross margin of 61.55% and a dividend yield of 0.03% [3]. - Starbucks, which began paying dividends in 2010, has raised its payouts by 720% over the past decade, resulting in a share price increase of over 1,000% [4][5]. Dividend Growth Comparison - Since 2020, Coca-Cola has increased its dividend from $0.41 to $0.52 per share, a 27% increase, while Starbucks raised its dividend from $0.41 to $0.61 per share, a 49% increase [8][9]. - Both companies had the same dividend payout in 2020, but their growth rates have diverged since then [8]. Financial Metrics - Coca-Cola's payout ratio is 67.7%, indicating a sustainable dividend, while Starbucks has a payout ratio of 103.9%, suggesting it is using cash reserves or debt to maintain its dividend [10]. - Coca-Cola reported a year-over-year earnings growth of 29.8%, contrasting with Starbucks' earnings decline of 47.1% [11]. - Coca-Cola's operating margin stands at 32.2%, significantly higher than Starbucks' 9.51%, which is below the S&P 500 average of 10.8% [12]. Share Buybacks - Coca-Cola has initiated a share buyback program, retiring 1.1 million shares last quarter and planning to buy back $6 billion worth of shares by 2030, which enhances dividend sustainability and earnings per share [13][14]. - Starbucks has not repurchased shares since May 2024, indicating a cautious approach during its turnaround efforts [14][15].

Summary of Global Restaurants Conference Call Industry Overview - **China's QSR Sector**: China is a critical market for global fast food expansion, with a population of 1.4 billion and a growing middle class. The QSR sector is highly competitive, with both global and local brands aggressively expanding their presence in lower-tier cities, which offer attractive unit economics and significant growth potential [1][2] Key Companies - **YUM Brands (YUMC)**: Operates approximately 15,000 KFC and Pizza Hut stores in China, accounting for about 25% of YUM's global store count. The company aims to increase its store count to 20,000 by 2026, targeting half of the Chinese population [1] - **McDonald's (MCD)**, **Starbucks (SBUX)**, and **Domino's Pizza (DPZ)**: Expected to derive around 40-50% of their net openings from China by 2025 [1] Core Insights - **Net Openings Forecast**: China is projected to account for over 75% of net openings at YUM and approximately 52% of net unit openings for MCD, SBUX, and DPZ in 2025 [1][9] - **Store Unit Economics**: Healthy store unit economics are observed, particularly in lower-tier cities, which supports favorable unit growth. However, soft consumer sentiment and pricing risks are emerging due to selective spending behavior [3][15] - **Sales Trends**: Total catering sales in China grew by 4% year-over-year in the first eight months of the year, but growth has decelerated, indicating potential risks in the market [12] Competitive Landscape - **SSSG Performance**: Brands have generally improved same-store sales growth (SSSG) year-to-date, aided by food delivery subsidies. However, there is significant divergence across brands, influenced by brand momentum and base effects [13][20] - **Pricing Strategies**: Some brands, like KFC and Luckin, have implemented price hikes, while others have been more disciplined in promotions. The impact of food delivery subsidies on pricing perception is a concern [15][20] Risks and Considerations - **Consumer Sentiment**: A relatively muted SSSG backdrop is noted, driven by soft consumer sentiment and lingering de-consolidation risks. The level of food delivery subsidies and their persistence through 2026 will be crucial in shaping transaction growth [3][12] - **Emerging Risks**: Pricing risks are re-emerging, particularly with food delivery subsidies lowering purchase prices for certain categories [15] Additional Insights - **Store Expansion Plans**: YUMC is expected to accelerate its net openings in the second half of the year compared to the first half, with multiple brands in the freshly made drink category also planning for store expansion [15] - **Market Dynamics**: The competitive landscape includes significant local players like Luckin and Mixue, which continue to expand their presence in the coffee and ready-to-drink tea segments [2][3] This summary encapsulates the key points discussed in the conference call regarding the global restaurant industry's dynamics, particularly focusing on the Chinese market and the strategies of major players within it.

Group 1 - Starbucks announced it will furlough 900 employees and close approximately 400 stores as part of a $1 billion restructuring plan, resulting in a 1% decline in North American stores for fiscal year 2025 [3] - US consumer confidence declined more than expected in September, with assessments of business conditions and job availability falling for the ninth consecutive month [6] - Inflation remained stable since August, with a year-over-year increase of 2.7% as measured by the Personal Consumption Expenditures (PCE) price index [6][10] Group 2 - The three major US stock market indices (Dow, S&P 500, Nasdaq) all finished the week with gains exceeding 1%, driven by investor interest in artificial intelligence [13] - The US national debt is approaching $38 trillion, raising concerns about fiscal sustainability [16] - The US M2 money supply surged by 4.8% year-over-year in August 2025, reaching a record $22.2 trillion, marking the fastest growth since July 2022 [17] Group 3 - The US Treasury's gold reserves have surpassed $1 trillion in value, which could significantly reduce the need for issuing Treasury bonds if revalued [19] - Analysts are discussing the potential for a gold revaluation, which could further impact the national debt-to-GDP ratio [23][26] - Year-to-date performance for major asset classes shows gold up 45%, silver up 61%, and gold miners proxy up 123% [27]

Core Insights - Starbucks is implementing a turnaround plan that includes eliminating 900 jobs and closing stores as part of a strategic review of its North American operations [1][2][3] Store Operations - The coffee chain plans to reduce its store count by 1%, resulting in a total of 18,300 locations in the United States and Canada [2] - The decision to close certain stores is based on an assessment of locations that do not meet customer expectations or financial performance criteria [3] Customer Experience Initiatives - Starbucks is focusing on creating a more inviting and relaxing environment in its coffeehouses, aligning with CEO Brian Niccol's vision [3] - The company has promoted "sit and stay" visits to counteract declining foot traffic and sales, allowing customers to buy beverages in reusable containers for free refills [4] Marketing and Brand Strategy - Starbucks is investing in advertising on TV and streaming platforms to enhance its brand appeal and encourage customers to visit [4] - The company plans to improve its mobile app, mobile order-and-pay features, and rewards program in the upcoming year [4] Performance Metrics - Early results from initiatives aimed at enhancing the coffeehouse experience indicate that customers are visiting more frequently, staying longer, and providing positive feedback [5]

Core Insights - Starbucks stock has decreased by approximately 15% over the last year, with historical data suggesting potential for further declines, as the company has previously suffered greater losses than the overall market during downturns [1][2][3] Revenue Growth - Starbucks achieved an average revenue growth of around 4.7% over the last three years, with a slight increase of 0.6% in the past year, raising sales from $36 billion to $37 billion [3] - Recent quarterly revenue rose 3.8% year-over-year, reaching $9.5 billion compared to $9.1 billion during the same period last year [3] - However, same-store sales experienced a global decline of 2% in the most recent quarter, with North America seeing a 3% drop in transaction volumes [4] Margin Compression - Operating income for the last year was $3.8 billion, resulting in a margin of 10.5%, while net income was approximately $2.6 billion, leading to a slim margin of 7.2% [5] - Operating margins in North America have fallen from above 20% to closer to 13%, influenced by rising labor costs, increased coffee bean prices, and the "Back to Starbucks" reinvestment strategy requiring over $3 billion in spending [7] Valuation Concerns - Starbucks stock is currently priced near $83, with projections indicating a potential drop to $40, representing a 50% decline if revenue growth stagnates and margins remain compressed [2][8] - EPS is projected to decline from $3.31 in FY 2024 to $2.20 in FY 2025, before partially recovering to $2.71 in FY 2026, indicating weaker profitability compared to previous years [8] - The stock trades at high multiples of 37x forward earnings for FY 2025 and 30x for FY 2026, significantly higher than peers like Coca-Cola and McDonald's [9] Long-term Outlook - Despite current challenges, Starbucks maintains long-term recovery potential due to its global scale, premium brand, and effective loyalty program, which provide pricing power and international growth opportunities [10]

Economic Indicators - The Congressional Budget Office (CBO) estimates that Trump's global tariff hikes could reduce deficits by $3.3 trillion and cut federal interest payments by $0.7 trillion over the next decade [5] - The employment rate for individuals aged 16 to 24 decreased to 53.1% in July 2025, down from 54.5% in July 2024, despite an increase in the youth labor force from 21.7 million in April 2025 to 23.7 million in July 2025 [5] Market Performance - Jefferies raised its year-end target for the S&P 500 to 6,600, up from a previous target of 5,600, citing strong second-quarter corporate earnings [5] Company Developments - Zoom reported a 4.7% year-over-year revenue growth and a 10.5% year-over-year growth in non-GAAP income from operations for its second quarter of fiscal year 2026 [5] - The U.S. government is set to acquire a 9.9% stake in Intel through a deal converting government grants into equity, providing Intel with $10 billion to expand chip factories in the U.S. [5] - Databricks is targeting a $100 billion valuation as it approaches a $1 billion Series K funding round, reflecting a 61% increase from its December 2024 valuation of $62 billion [5] - Starbucks announced a reduction in production from seven days a week to five, following a cap on raises for North America salaried employees to a fixed 2% [5] - Keurig Dr Pepper plans to acquire European JDE Peet's for $18 billion, which owns a variety of coffee and tea brands [5] Social Concerns - A Pew Research Center survey indicates that 70% of Americans view the spread of false information online as a major threat, ranking it higher than terrorism and the global economy [5] Media Performance - Fox achieved its best preseason NFL game viewership in four years, with 5.11 million viewers for the Bears-Bills game on August 17, although the highest remains the Pro Football Hall of Fame Game in 2021 with 7.4 million viewers [5]

Group 1: Market Overview - A softer-than-expected July inflation report has improved investor sentiment and revived hopes for a rate cut [1] - Traders are awaiting more economic data to gain further insights about the state of the U.S. economy [1] Group 2: Stock Recommendations - Investors are encouraged to search for stocks with strong long-term growth potential to enhance portfolio returns [2] - Recommendations from top Wall Street analysts can assist in identifying attractive stocks based on in-depth analysis of financials and growth prospects [2][3] Group 3: Pinterest (PINS) - Pinterest reported mixed results for Q2 2025, with revenue surpassing expectations but earnings missing consensus estimates [4] - BMO Capital analyst Brian Pitz increased the price forecast for Pinterest stock to $41 from $40 and reiterated a buy rating [5] - Q2 performance was impacted by a 25% drop in advertising pricing due to rising market share in previously unmonetized markets [6] - Pitz views Pinterest as a "Clear AI Winner," benefiting from AI-powered search functions and algorithm upgrades [7] - Gen-Z constitutes more than half of Pinterest's user base, providing valuable customer insights for advertisers [8] Group 4: CoreWeave (CRWV) - CoreWeave reported market-beating revenue for Q2 and issued better-than-anticipated guidance for Q3, but reported a larger-than-expected loss [9] - Jefferies analyst Brent Thill reiterated a buy rating on CoreWeave stock with a price target of $180, highlighting an 86% year-over-year jump in remaining performance obligations (RPO) [10] - Thill remains optimistic due to expansion deals with two hyperscalers and a ramp-up in capacity, adding 600 megawatts of contracted power [11] Group 5: Starbucks (SBUX) - Jefferies analyst Brent Thill upgraded Starbucks stock to buy from hold and increased the price target to $115 from $100 [13] - The stock has underperformed, sinking by 16% over the past six months, but Thill believes the risk/reward profile has improved [13] - Turnaround initiatives under new leadership are expected to drive improvement in U.S. comparable sales in Fiscal 2026 [13] - Thill anticipates gaining more visibility on Starbucks' earnings outlook as turnaround efforts become clearer, particularly regarding cost-saving initiatives [14] - The goal is to revive operating margins to 17% seen in Fiscal 2019, compared to 10.3% in Fiscal 2025 [14]

Core Viewpoint - Starbucks is implementing zero-based budgeting (ZBB) as part of its turnaround strategy to identify savings while increasing spending on its "Back to Starbucks" plan, which includes hiring more baristas [1][2]. Group 1: Zero-Based Budgeting Implementation - The zero-based budgeting method requires managers to justify all expenditures each year rather than basing them on previous spending [1]. - CEO Brian Niccol emphasized the importance of ZBB in exploring growth opportunities and identifying potential cost offsets during the company's earnings call [2]. - CFO Cathy Smith, who recently joined Starbucks, expressed her support for using ZBB to uncover stranded costs [2]. Group 2: Historical Context and Adoption - ZBB gained traction in the 1970s, notably advocated by former President Jimmy Carter, although it was not widely adopted by the federal government [3]. - Major brands, including AB InBev and Kraft Heinz, have successfully implemented ZBB to reduce costs and improve margins [3][4]. - The strategy has faced criticism for being overly stringent, potentially hindering employee productivity and innovation, as seen in the experiences of former Kraft Heinz employees [4][5]. Group 3: Other Companies Using ZBB - Companies like X (formerly Twitter) and General Motors have also adopted ZBB during critical transitions, such as after Elon Musk's acquisition and in response to pandemic-related disruptions, respectively [6].

Group 1: Walt Disney - Walt Disney has faced challenges in achieving profitability in its streaming business and has potentially overvalued its theme parks without sufficient investment in customer experience [3] - In the most recent quarter, Disney's revenue increased by 5%, with operating income and adjusted earnings per share growing by 31% and 44% respectively, attributed to management's focus on efficiency [4] - Disney is currently trading at its lowest price-to-sales multiple since the financial crisis, approximately 30% below its recent high, presenting a potential entry point for long-term investors [5] - For the current fiscal year, Disney anticipates about $15 billion in operating cash flow and $3 billion in buybacks, with a long-term investment plan of $60 billion in its parks over the next decade [6] Group 2: Starbucks - Starbucks experienced a significant stock rally in August 2024 with the announcement of Brian Niccol as the new CEO, but the stock has since fallen by 30%, reaching its lowest price since before his hiring [7] - Niccol has initiated a turnaround plan called "Back to Starbucks," which includes simplifying the menu, reducing wait times, and enhancing the in-café experience, showing promising early results [8] - The latest earnings report exceeded analyst expectations, although comparable sales saw a slight year-over-year decline; however, key customer-related metrics improved on a sequential basis [9] - Starbucks is currently trading at a historically low price-to-sales ratio, and if the turnaround efforts succeed in revitalizing growth and improving margins, the current price may represent a bargain for long-term investors [12] Group 3: Tariff Risks - Both Walt Disney and Starbucks are significantly exposed to China, with Starbucks operating nearly 7,600 stores in the country, representing about 19% of its total [13] - Both companies are cyclical and depend on consumer spending, which could be adversely affected if tariffs lead to inflation or a recession [14] - Despite the risks, both companies are viewed as attractive long-term investments, with the potential for steady growth over the years [15]