Starbucks (SBUX) is expected to report better-than-expected fiscal Q3 same-store sales, though overall investor sentiment is slightly negative, RBC Capital Markets said in a note Monday.

Expectations for earnings in fiscal 2025 and 2026 are low, but most investors hope to see stronger profits in 2027, RBC said.

Meanwhile, the risk-reward outlook is considered slightly favorable given management's confidence in labor investments, shown by plans to expand these changes to all North American stores by the end of fiscal 2025, the note said.

RBC estimated the labor expense could increase by 5% to 15% per store, with labor making up roughly 20% of total North American revenue in fiscal 2024, according to the note.

While mobile ordering improvements have taken a backseat, faster service times from better order sequencing could boost traffic over time, RBC said.

Investors are also waiting for an update on Starbucks' China business, where the company is reportedly exploring strategic alternatives, the note added.

RBC maintained an outperform rating for Starbucks with a $100 price target.

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