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 Can Starbucks steal back some of Panera's customers? Why Starbucks Should Stay Hot Is this just the beginning for Starbucks' growth? Other Stocks in the News A Look at Four Major Players in Multiple Sclerosis Treatments Which one of these companies will profit the most from MS treatments? A Leader, a Comeback Kid and Two Hungry Challengers in the Fast Food Sector A quick glance at fast food companies across the board. Copyright 2013 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 29, 2013
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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