Starbucks (SBUX) Is Still Sitting Pretty At All-Time Highs

Coffee giant Starbucks (SBUX) impressed Wall Street again last week with robust fourth quarter earnings. The company earned an adjusted $0.63 per share, a 37% increase over the prior year quarter. Revenue climbed 13% to $3.8 billion, driven by new store openings, strong same-store sales in the United States, and increased traffic in Europe. Global same-store sales rose 7%, driven by a 5% jump in total store traffic.

Starbucksâ operating margin also rose from 15.4% to 17.6%, due to lower coffee costs, higher pricing power, and better product optimization in Europe.

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Growth in the United States was fueled by higher seasonal beverage sales, such as the pumpkin spice latte, better food choices, such as its La Boulange bakery items, and the increased popularity of Starbucks loyalty cards. The same factors helped drive sales in Canada and Latin America. Sales growth is expected to continue throughout the Americas for these reasons, and will likely be enhanced by the addition of Teavana tea stores in the United States.

Sales in Europe, the Middle East, and Africa rose 3%, driven by improved same-store sales and higher traffic. Starbucks is trying to steer things in the right direction in Europe, by pursuing higher-margin licensing opportunities, shutting down non-performing stores, and reducing expenses across the board.

Starbucks also performed well in the high growth China and Asia-Pacific region, posting 29% year-over-year growth, fueled by an 8% jump in same-store sales and a fast rate of new store openings. The company also opened its 1000th stores in China and Japan. Operating margins rose from 33.1% to 37.5%, but the company notably received some bad press last month when complaints arose in China regarding the higher pricing of its items on the mainland in comparison to its Asian neighbors.

Lastly, sales at its packaged goods segment rose 13% thanks to strong sales of Starbucks/Tazo branded K-Cups and high sales of foodservice items.

In short, sales rose across all major segments, and the stock continued rising towards lifetime highs. To date, shares of Starbucks are up more than 70% over the past year. The stock trades at 25.3 times forward earnings with a 5-year PEG ratio of 1.6 -- indicating that it could be trading at a slight premium to its peers with average growth ahead.

Other News About Starbucks Starbucks defends China prices, finds support Starbucksâ Chinese fans stick up for the company. Starbucks Aims to Move Beyond Beans Starbucks expands into drinks beyond coffee. Other Stocks in the News Apple fans lining up for new iPad Air Apple fans line up.. again. Will Costco blaze new trails? Is Costco headed even higher? Copyright 2013 by InvestorGuide.com, 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 InvestorGuide.com, Inc.) or its employees responsible.
Published on Nov 4, 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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