Starbucks' 52-Week High on GMCR Deal - Analyst Blog
May 13 2013 - 10:00AM
Zacks
Shares of coffee giant
Starbucks Corporation (SBUX) reached a 52-week
high of $63.19 on Friday, May 10, following its announcement of the
expanded K-Cups distribution deal with specialty coffeemaker
Green Mountain Coffee Roasters, Inc. (GMCR). The
deal is expected to further strengthen Starbucks’ presence in the
premium coffee market.
Starbucks beat its previous high
reached late last month on the back of strong earnings results for
the second quarter of fiscal 2013. Starbucks also upped its
earnings guidance for fiscal 2013, while retaining its sales, comps
and operating margin outlook.
The closing price of the coffee
maker on May 10 was $63.10, representing a solid 1-year return of
about 16.5% and year-to-date return of about 15.5%. Average volume
of shares traded over the last three months stands at approximately
5028K.
Growth Drivers
Starbucks and Green Mountain have
announced a new minimum five-year agreement under which Starbucks
will triple the number of Starbucks products that can be run on
Green Mountain’s Keurig brewers. Under the existing agreement,
Starbucks manufactures and sells Starbucks-branded single serve Vue
and K-Cup packs to be used on the Keurig platform. Keurig is an
exclusive single-cup machine which makes Starbucks coffee and Tazo
tea.
Under the new expanded agreement,
Starbucks will supply other brands including Seattle’s Best Coffee,
Torrefazione Italia coffee, Teavana Teas, and Starbucks Cocoa in
addition to the Vue and K-Cup packs. The expanded agreement, which
replaces the first deal entered in Mar 2011, further strengthens
Starbucks’ position in the premium single-cup coffee market.
The premium coffee segment now
accounts for over 50% of the total coffee sold in the U.S. grocery,
drug, and mass channels. Starbucks owns 28.2% share of premium
coffee in these channels. In the premium segment, premium single
cup makes up 20% of the market. Starbucks, through the VIA Ready
Brew and Starbucks K-Cups, commands almost 22% share of the premium
single cup market, which is a huge improvement from its zero
presence in this segment just a couple of years back. The long-term
strategic Green Mountain tie, together with the newly launched
Verismo at-home-coffee machine and the innovations around VIA and
K-Cups are expected to help Starbucks capture further share of this
fast growing market in the coffee industry. The premium
single-serve category is expected to become an $8 billion market
globally.
Starbucks carries a Zacks Rank #2
(Buy). The company has compelling growth drivers, like La Boulange
bakery products, Verismo at-home-coffee machine, Evolution Fresh
juices, Teavana tea and K-Cups portion packs, to sustain earnings
momentum in the upcoming quarters.
Bloomin' Brands,
Inc.(BLMN) and Cracker Barrel Old Country Store,
Inc. (CBRL), both carrying a Zacks Rank #1 (Strong Buy),
are other stocks worth considering in this space.
BLOOMIN BRANDS (BLMN): Free Stock Analysis Report
CRACKER BARREL (CBRL): Free Stock Analysis Report
GREEN MTN COFFE (GMCR): Free Stock Analysis Report
STARBUCKS CORP (SBUX): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
Keurig Green Mountain, Inc. (NASDAQ:GMCR)
Historical Stock Chart
From Sep 2024 to Oct 2024
Keurig Green Mountain, Inc. (NASDAQ:GMCR)
Historical Stock Chart
From Oct 2023 to Oct 2024