A "cup of joe" still appears to be America's favorite pastime. This is the case according to a coffee consumption survey conducted by the National Coffee Association in its 2013 survey. According to the 2,840 respondents, 83% of adults in the United States drink coffee. This is up from 78% in the prior year. The survey also showed that the single-cup format was on the rise as indicated by a jump to 13% from 4% in the two years prior.
The trend bodes well for Starbucks (SBUX), a leading roaster, marketer and retailer of specialty coffee worldwide. The company most recently expanded its partnership with single-cup specialist Green Mountain Coffee Roasters (GMCR) in May 2013. The partnership between the two companies extends back since 2011 and is slated to be extended for at least another five years.
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Overall, Starbucks continues to perform quite well as witnessed by its positive performance on the market over the past few years. The company's stock has increased over 500% since 2009 and has thus far proven that there remains significant growth opportunities within the industry. The share price of the company has steadily climbed out of its Great Recession dip as seen in the graph above. This trend remains strongly correlated to the company's impressive revenues and earnings increases over the same time period.
A look at the company's latest earnings results indicate that the trend is likely to continue. The following few thoughts were taken from the company's Second Quarter Fiscal Year 2013 Earnings Conference Call found here:
The company reported global comparative-store sales of 6% and comparative growth of 7% in the United states. This was the 13th consecutive quarter of comparative growth greater than 5%.
The company also improved its operating margin in Q2 by 180 basis points to a Q2 record of 15.3%.
The company's Q2 earnings-per-share of $0.51 was a company record for Q2. It also represented a 20% increase over the prior year's Q2 record results.
Starbucks plans to add approximately 3,000 new stores in the Americas over the next five years with at least 1,500 being in the United States. The company is already on track to open over 300 new stores in the U.S. for this year.
China & the Asia-Pacific region proves to be a promising area of growth. The company expects to have 4,000 stores in the region by the end of 2013 including more than 1,000 stores in Mainland China and 500 stores in South Korea.
One area of weakness remains dollar sales in roast and ground coffee. Starbucks saw sales decline 3.5% versus the prior year despite outperforming the industry in this area.
For the most part, it appears that the company's growth continues to remain strong. This is also beginning to show itself through various shareholder-friendly policies. Starbucks repurchased approximately 3 million shares of stock over the second quarter. The company still has approximately 26 million shares authorized as available to repurchase. Additionally, the company now offers a $0.21 quarterly dividend resulting in an annual yield of 1.24% according to the last price of $67.72 as of July 7, 2013. A look at the graphic below shows that the company continues to grow its dividend and has now more than doubled its rate since 2010.
Starbucks now trades with a market capitalization of $50.7 billion. The company appears to be trading on the higher end according to its price/earnings-to-growth ratio of 2.39. All the same, Starbucks is likely to maintain its current ascension as long as the earnings continue to grow at a similar rate that the company has been setting over the last few years.
Even at its current market price, Starbucks appears to be a steady buy-and-hold candidate. It is true the company has seen a significant climb in price over the past few years, but the current growth outlook continues to suggest there is more in store for Starbucks in the years to come. The company's introduction of a growing dividend in 2010 remains a positive indicator of its current progress. Starbucks remains a solid company to consider upon any weakness as long as its growth outlook remains strong.