Luckin Coffee (LKNCY) Earnings Preview: Will the Brew Stay Strong?

Luckin Coffee stock (OTC: LKNCY) has racked up 40% in gains so far this year, outperforming broader markets, and putting others in the sector such as Starbucks (SBUX, 8% lower YTD) in the shade for a while. The once-troubled Chinese coffee chain has engineered a remarkable turnaround, and is set to release its third-quarter 2025 financial results before the U.S. market opens today.

Analysts are forecasting an average earnings per share (EPS) of 0.65 and a robust revenue estimate of A$1.94 billion. This strong performance is poised to underscore the company’s growth trajectory and expanding market presence, making it a stock to watch.

Over the past 52 weeks, the stock has traded between $21.03 and $43.64, a testament to the volatility and, ultimately, the upward momentum the company has experienced. The upcoming earnings release will be a crucial test of whether the company can justify the market optimism that has fueled its recent surge.

Luckin's recent performance has been nothing short of stellar. In the second quarter of 2025, the company reported a 47% year-over-year increase in total net revenues, reaching RMB 12.4 billion. The company added a staggering 2,085 net new stores domestically, bringing the total store count to 26,117.

Operating profit increased by 62% year-over-year to RMB 1.7 billion, with operating margins expanding to 13.8%. Monthly average transacting customers grew 32% year-over-year to nearly 91.7 million. These impressive figures surpassed expectations and sent a clear signal that Luckin's comeback was not just a flash in the pan.

Adding fuel to the fire, Luckin reported an EPS of $0.64 in Q2 2025, significantly exceeding the consensus estimate of $0.07. This substantial beat has raised expectations for the upcoming Q3 report.

The prevailing sentiment among analysts is overwhelmingly positive. Macquarie initiated coverage of Luckin Coffee with an ‘Outperform' rating and a price target of $52.00, suggesting significant upside potential. Analyst Linda Huang at Macquarie cited the rapid expansion of China's coffee market and Luckin's successful overtaking of Starbucks as the country's largest coffee chain as key drivers for future growth. Macquarie anticipates that Luckin will sustain a net profit growth rate of at least 20% per year.

This bullish outlook is further supported by Luckin's strategic initiatives, including its aggressive store expansion, innovative product offerings, and successful navigation of the competitive landscape. The company's recent expansion into the U.S. market, with the opening of its first stores in New York City, also signals its ambition to become a global coffee powerhouse.

Upcoming Earnings: What to Expect

• Revenue Growth: Can Luckin maintain its impressive revenue growth rate from previous quarters? Analysts will be looking for continued strong performance, driven by both same-store sales growth and the addition of new stores.
• Profitability: Will the company be able to sustain its operating margins in the face of rising competition and potential cost pressures? Maintaining or expanding margins will be crucial to demonstrating the sustainability of Luckin's business model.
• Store Expansion: How many new stores did Luckin add during the quarter? The pace of store expansion is a key indicator of the company's growth strategy and its ability to capture market share.
• Customer Engagement: Did the company continue to grow its monthly average transacting customers? Sustained customer engagement is essential for driving long-term revenue growth.
• Guidance: What is Luckin's outlook for the remainder of 2025 and beyond? Analysts will be looking for management's guidance on future growth prospects and profitability.

While the prevailing sentiment surrounding Luckin Coffee is undeniably positive, it's essential to consider potential risks and challenges. The company's rapid expansion has come at a cost, and it remains to be seen whether it can maintain its current growth rate in the long term.

The Chinese coffee market is becoming increasingly competitive, with both domestic and international players vying for market share. Starbucks is not standing still and is investing heavily in its own expansion and innovation.

Furthermore, Luckin's international expansion into the U.S. market presents significant challenges, including adapting to different consumer preferences, navigating complex regulatory environments, and managing higher labor costs.

The upcoming Q3 2025 earnings release will provide valuable insights into the company's ability to sustain its growth momentum and solidify its position as a leading player in the global coffee market. The $40 mark has offered up some resistance to the upside, whilst $37 has provided some support in recent attempts to the downside. Closely positioned leading in to the print, volatility can be expected.