Back to top

Analyst Blog

On Jun 17, we maintained a Neutral recommendation on Starbucks Corporation (SBUX - Analyst Report), following its mixed fiscal-second quarter 2013 results.

Why the Neutral Recommendation?

The coffee giant’s fiscal-second quarter 2013 earnings of 47 cents per share were in line with the Zacks Consensus Estimate. Earnings grew 20% year over year driven by solid margin growth. Revenues increased 11% as steady sales growth in the U.S. and Asia were partially offset by weakness in Europe. However, Starbucks failed to meet the Zacks revenue expectations despite the strong U.S. comps.

Moreover, though the company increased its earnings expectations for fiscal 2013, it did not change its sales outlook — signaling a lack of real growth. For fiscal 2013, the company continues to expect revenues to grow in the range of 10%–13% driven by mid single-digit comparable store sales growth and net new store openings. Earnings expectations were increased from a range of $2.06 — $2.15 to $2.12 — $2.18. However, the earnings guidance includes the second-quarter one-time gain from sale of a minority equity stake in a joint venture in Mexico.

Overall, we are encouraged by Starbucks’ strong market standing, new product launches, rapid growth in international markets, the flourishing Channel Development business and solid turnaround in the U.S. We believe that the company has compelling growth drivers like La Boulange, Verismo, Teavana, K-Cups, loyalty program and food innovations to sustain the earnings momentum, going forward.

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.

Other Stocks to Consider

Starbucks carries a Zacks Rank #3 (Hold). CEC Entertainment Inc. , carrying a Zacks Rank #1 (Strong Buy) and Bloomin' Brands, Inc. (BLMN - Snapshot Report) and Cracker Barrel Old Country Store, Inc. (CBRL - Snapshot Report), both carrying a Zacks Rank #2 (Buy), are other stocks worth considering in this space.

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
SYNAPTICS I… SYNA 78.11 +8.14%
GREEN PLAIN… GPRE 39.41 +5.12%
PILGRIM'S P… PPC 28.82 +3.08%
SKYWORKS SO… SWKS 52.07 +2.58%
CLAYTON WIL… CWEI 109.08 +2.51%