Starbucks (SBUX) Reports Foaming Hot Third Quarter Earnings
Shares of coffee giant Starbucks (SBUX) surged last week, after the Seattle-based company reported strong top and bottom line growth that topped analyst estimates. For its third quarter, Starbucks earned an adjusted $0.55 per share, up from the $0.43 it reported in the prior year quarter. Revenue rose 13% year-on-year to $3.74 billion. CEO Howard Schultz touted Starbucks' impressive earnings as the "best across-the-board third-quarter performance in our 42-year history," and investors agreed, bidding the shares up more than 7% on Friday.
Shares of Starbucks are now up more than 40% over the past twelve months. Daily Chart
Starbucks' same-store sales rose 8% globally, with a 9% gain in the Americas and 9% growth in China and the Asia-Pacific region. Starbucks' robust growth in China surprised analysts, who had expected an economic slowdown to take its toll on higher-priced coffee drinks. Starbucks has also expanded across Southeast Asia, focusing heavily on boosting its store count in Indonesia and the Philippines. During the quarter, Starbucks opened 341 new stores, a big increase from the 231 stores it opened in the prior year quarter. The company currently operates 19,209 stores worldwide. Starbucks' strong quarterly performance was a stark contrast to McDonald's (MCD
), which reported same-store sales growth of 1%, as sales in Europe, Asia, and North America remained weak. McDonald's McCafe line of beverages and desserts has long been considered a threat to Starbucks due to its cheaper prices, but Starbucks' blowout quarter proves that there is still room for premium beverage makers on the market. Starbucks operating margin also rose from 14.9% to 16.4% on more expensive drinks and lower coffee bean prices. Starbucks has also been enhancing its food menus, adding new, more expensive sandwiches in April, along with salads and grain bowls. It also recently partnered up with Danone to enter the yogurt business, offering new Greek yogurt parfaits which will become available next year. Starbucks has been diversifying its menu in response to Panera Bread's (PNRA
) explosive growth over the past five years. Looking forward, Starbucks forecasts fourth quarter earnings between $0.56 and $0.57 per share, in line with analyst estimates. For the full year, the company expects to earn $2.22 to $2.23 per share, up from its original forecast of $2.12 to $2.18 per share. Revenue is expected to grow 10% to 13%, in line with the consensus estimate for 12% growth. Even after its recent rally, shares of Starbucks are not particularly expensive at 28 times forward earnings. The stock has a 5-year PEG ratio of 1.66, indicating fairly healthy growth ahead, and pays a quarterly dividend of 1.2%. Other News About SBUX Starbucks to Serve Up More Upscale Food
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Published on Jul 29, 2013
By Leo Sun