Starbucks (SBUX) Shares Plunge Over 10% on a 2 Cent Miss

Coffee giant Starbucks (SBUX: Charts, News) stumbled at the end of last week, after the company's third quarter earnings missed analysts' forecasts and it provided downbeat guidance for the rest of fiscal 2012. Shares crashed over 10% on Friday after Starbucks posted earnings of 43 cents per share, or $333.1 million, on revenue of $3.3 billion.

This was a 19% increase in earnings and a 13% increase in sales from the prior year quarter, but fell short of analysts' expectations of 45 cents per share on $3.33 billion in revenue. This was Starbucks' first miss on both the top and bottom lines since December 2008. Daily Chart
Looking ahead to the next quarter, Starbucks expects earnings of 44 cents to 45 cents per share, slightly below its previous quarterly guidance of 46 cents to 47 cents per share. For fiscal 2013, Starbucks revised its EPS guidance to $2.04 to $2.14 per share, lower than the average forecast of $2.28 per share. During the third quarter, Starbucks' global same-store sales increased by 6%. Same-store sales in the Americas, its strongest market, rose 7%. In China, its main growth market, and the rest of the Asia-Pacific area, same-store sales surged by 12%. Meanwhile, same-store sales in Europe remained flat, as expected. Starbucks' European segment notably posted a small profit, after posting a loss in the previous quarter. CEO Howard Schultz remained optimistic despite strong macro headwinds in 2012. "Even though we missed our expectation for the quarter by a penny, this is still a record quarter, despite the challenging economy and consumer headwinds," Schultz told investors. "And our 7% same-store sales growth in the U.S. is almost best of class compared to what the rest of retailers have been reporting." CFO Troy Alstead also noted that same-store sales growth tends to stall in June, and that Starbucks' same-store sales growth remains higher than comparable retailers. Operating margin also increased from 13.7% to 14.9%. "We remain confident in the underlying strength of our business," Alstead stated, "in the strategies we have in place for driving sustained, profitable growth, and in our ability to again drive earnings growth in the range of 15 -20 percent in fiscal 2013." Starbucks' results were firmly in line with the rest of the U.S restaurant industry. Shares of Dunkin Brands (DNKN: Charts, News), McDonald's (MCD: Charts, News) and Chipotle (CMG: Charts, News) also fell this month after reporting lower-than-expected same-store sales and growth caused by similar macro headwinds. Starbucks stated that its long-term growth strategy remains intact, as it aims to expand beyond its core caf business competencies and into other disruptive markets, such as instant coffee machines, alcoholic beverages, and baked goods. Starbucks intends to open 1,200 new stores next year. 600 will be opened in North and South America, with the majority within the United States. 500 new stores will be added in Asia, with over half to be opened in China. 100 new stores will open in Europe, the Middle East, Russia and Africa. After the steep plunge, shares of Starbucks now trade at 20.5 times forward earnings with a 5-year PEG ratio of 1.47, and are now at its fundamentally cheapest levels since the beginning of the year. Shares have traded in a broad 52-week range between $33.72 and $62.00. The stock pays a quarterly dividend of 17 cents per share. Other News About SBUX Starbucks Earnings Rise 19 Percent Starbucks posts decent earnings, but shares plunge 10%. Starbucks Profit Rises; Full-Year Outlook Weak Starbucks notes challenging macro headwinds for the rest of the year. Other Stocks in the News Facebook Stock Drops 11% in Mid Day Trading Facebook plunges after earnings. Yum Brands Novak Named CEO of the Year Yum shares stabilize as Novak is named CEO of the Year. Copyright 2012 by, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. The news, analysis, commentary and profile information is not meant to be comprehensive, and the data provided is not guaranteed to be accurate. WebFinance Inc., the publisher of this newsletter, is not a registered investment advisor or a broker/dealer. This is not a stock recommendation newsletter but rather a source for investment ideas, and we encourage you to fully research any company before considering investing. The opinions expressed herein are those of the author and do not necessarily represent the views of nor are they endorsed by WebFinance Inc. No employee of WebFinance has owned or currently owns any shares in the company described above. The above is neither an offer nor solicitation to buy or sell any securities. The trading of securities may not be suitable for all potential readers of this newsletter, and the purchase of stocks mentioned in this newsletter may result in the loss of some or all of any investment made. We recommend that you consult a stockbroker or financial advisor before buying or selling securities or making investment decisions. We are not responsible for claims made by advertisers and sponsors. Anyone who makes decisions based on what they read here does so at their own risk and cannot hold WebFinance Inc. (DBA, Inc.) or its employees responsible.

Published on Jul 30, 2012
By Leo Sun
Leo Sun
Leo Sun is a freelance finance writer and position trader. He focuses on a combination of value and momentum investing, with a strong interest in the trading philosophies of Warren Buffett and Peter Lynch. Leo also has experience writing articles to help small business owners acquire loans and manage their finances. He regularly contributes to the Stock of the Day analysis.

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