SBUX Starbucks Corporation

   (FROM THE WALL STREET JOURNAL 1/21/16) 
   By Steven Russolillo 

Remember Starbucks Corp.'s Christmas cup fiasco? The plain red receptacles prompted nationwide debate over political correctness. Even presidential hopeful Donald Trump jumped into the fray, suggesting people should boycott Starbucks because of it.

Customer complaints and social-media outrage boiled over in November. A quick Google search now of Starbucks and Christmas still returns 26.5 million results, underscoring just how widespread the episode truly was.

Yet it is important to remember that when Starbucks reports fiscal first-quarter results Thursday, the controversy is unlikely to have much, if any, impact on its business.

Analysts polled by FactSet expect earnings of 45 cents a share for the period ending in December, up from 40 cents in the same period a year earlier. Revenue is estimated to rise 12%. That would represent the 17th consecutive quarter of double-digit revenue growth on a percentage basis.

Starbucks has benefited of late by diversifying beyond its coffee roots. It is in the midst of a five-year plan to double its U.S. food revenue. And digital initiatives such as a new mobile app also have helped cafes operate more efficiently, in turn boosting sales.

One worry comes from overseas. In its fiscal fourth quarter, Starbucks's same-store sales in its China and Asia Pacific region fell well short of estimates.

Starbucks shares, up 36% over the past 12 months, have held up relatively well in this year's early going, dropping by less than the overall market. The stock also trades at a reasonable 28 times projected earnings over the next 12 months, below its average multiple over the past year.

While Starbucks sports a higher valuation than fast-food competitors such as Panera Bread Co., Dunkin Brands Group Inc. and Krispy Kreme Doughnuts Inc., it is a respectable premium that Starbucks has commanded for years as it has diversified its offerings.

For investors, this cup of coffee still looks enticing in any color.

(END) Dow Jones Newswires

January 21, 2016 02:47 ET (07:47 GMT)

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