Starbucks Remains Neutral - Analyst Blog
March 06 2013 - 5:40AM
Zacks
On Mar 5, we maintained a Neutral recommendation on
Starbucks Corporation (SBUX), following its
fiscal-first quarter 2013 results, which were in line.
Why the Neutral Recommendation?
The coffee giant’s fiscal-first quarter 2013 earnings of 57
cents per share were in line with the Zacks Consensus Estimate.
Earnings grew 14% year over year, almost in line with management’s
expectation of being at the lower end of its full-year growth range
of 15%–20%. Earnings growth was driven by solid top-line
performance and lower taxes, which made up for the unusual cost
pressures in the quarter.
Solid comps, strong holiday performance in the U.S., significant
innovation, further expansion in China and Asia Pacific and
continued momentum in the Channel Development segment drove the 11%
top-line growth in the quarter.
Following the flat first-quarter results, the company maintained
its previously provided outlook for 2013.
The Zacks Consensus Estimates have seen a mixed movement
following the in line results. While those for fiscal 2013 have
mostly moved upwards, estimates revisions for fiscal 2014 have seen
a mixed trend. Overall, the Zacks Consensus Estimate for both
fiscal 2013 and 2014 has remained stagnant over the last 60
days.
Overall, we are encouraged by Starbucks’ strong market standing,
new product launches, rapid growth in China, the flourishing CPG
business as well as the solid turnaround in its U.S. business. We
believe that the company has compelling growth drivers like La
Boulange, Verismo, Teavana and K-Cups to sustain earnings momentum
in the next few quarters.
However, poor sales in Europe due to the depressed macroeconomic
conditions keep us on the sidelines. In the U.S., though some signs
of modest economic recovery and improving consumer confidence can
be seen, there is still great uncertainty as the fiscal cliff
looms. 2013 is also not expected to see any robust economic growth
in the U.S.
Other Stocks to Consider
Starbucks carries a Zacks Rank #3 (Hold). Some other
retail/restaurant stocks worth considering include Red
Robin Gourmet Burgers Inc. (RRGB) – Zacks Rank #1 (Strong
Buy), Krispy Kreme Doughnuts, Inc. (KKD) -Zacks
Rank #2 (Buy), and Dunkin' Brands Group, Inc.
(DNKN) - Zacks Rank #2 (Buy),
DUNKIN BRANDS (DNKN): Free Stock Analysis Report
KRISPY KREME (KKD): Free Stock Analysis Report
RED ROBIN GOURM (RRGB): Free Stock Analysis Report
STARBUCKS CORP (SBUX): Free Stock Analysis Report
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