Overview
Starbucks (SBUX) is scheduled to report 1Q 2012 earnings after the close of trading on Thursday, January 26. Results are typically available several minutes after the closing bell and will follow with a conference call at 5:00 p.m. EST.
Outliers & Strategy
- Key measures covered by Selerity:
- Non-GAAP Earnings Per Share: The value for this measure compares with consensus estimates. The estimate is $0.49. (Source: Yahoo! Finance)
- Revenues: Revenues are seen growing 11.7% to $3.29 bln.
- Earnings Per Share Guidance (FY2012): Back in November, the company said it expects EPS of $1.75 to $1.82, representing 15% to 20% growth over the $1.52 EPS in FY11, consistent with its long-term outlook. Starbucks also sees 10% revenue growth.
Coffee Futures are at the lowest level in close to a year, while Starbucks shares are at all-time highs. See chart below. (Chart courtesy of StockCharts.com)
Sympathy Plays: Peet's Coffee & Tea (PEET), Green Mountain Coffee Roasters (GMCR), Dunkin' Brands Group, Inc. (DNKN), Coffee Holding Co. Inc. (JVA), and Caribou Coffee Company (CBOU).
Back in November, Starbucks raised its quarterly dividend 31% to $0.17 And said it was buying back shares.
Recent News
- 01/25: Oppenheimer upgraded Starbucks to Outperform from Perform with a $56 price target, according to StreetInsider.com, citing an attractive 1.3x PEG ratio.
- 01/03: Starbucks raised prices by an average margin of 1% in the Northeast and Sunbelt, according to Reuters.com. The report showed the move was intended to offset rising costs.
- 12/30: Janney Montgomery added Starbucks to the 2012 Top Picks List according to a post on Barron's. The firm cited same-store sales trending above the 4% forecast, lower coffee costs, and momentum of the K-Cup partnership with Green Mountain.
- 12/28: D.A. Davidson upgraded Starbucks from Neutral to Buy, based on compelling global growth and called the company one of the best large-cap consumer growth companies, according to Barron's.
Technical Review
Starbucks shares recently broke out to an all-time high of $48.39 (1/20/2012) in advance of the 1Q 2012 earnings release. Given the ascent, there is no resistance above that recent peak. Should the rally fade, look for initial support near $47, just above the 20-Day SMA, with further downside risk toward $45, nearly coinciding with the 50-Day SMA. Take note of the chart for coffee futures (above) and the opposite direction with Starbucks shares. (Chart courtesy of StockCharts.com)
Summary
Starbucks shares are trading at an all-time high headed into the 1Q 2012 earnings release, thanks in part to declining coffee prices, improving same-store sales trends, global growth opportunities, and pricing power in key markets. The company is also paying an attractive dividend (a 31% increase in November, 2011) and buying back stock (20 mln share repurchase announced in November). The 44% rise in the shares over the past year has some concerned that Starbucks shares may be due for a pullback, particularly at 3.1x sales, above the 5-year average of 1.9x. With that being said, Starbucks is widely expected to deliver a solid profit report and at a minimum, maintain its previous outlook for 2012. Anything less may be disappointing.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
