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Starbucks (SBUX) reports fiscal Q4 2012 earnings after the bell on Thursday, Nov. 1. The consensus analyst estimates are looking for earnings per share of $0.45 on $3.386 billion in revenue, for expected year-over-year growth of 22% and 12%, respectively.

Quarterly comps are expected at 5%, which is a continued slowing over the last four quarters, from 9% to 7% to 6% in the last three quarters. The stock has given up all of its nice gains for the year and closed at $45.87 on Friday, about flat with its Dec. 30, 2011, close of $46.01. So investors have essentially earned the dividend in 2012, indicating that the stock isn't immune from the global slowdown.

The issues last quarter, which have resulted in weakness in the stock price and some pressure on forward estimates, were the result of slowing comps from slowing traffic and a tailwind from declining coffee costs that might be offset by diary. Europe was weak, while China was actually strong in Q3 2012.

There is no question Starbucks continues to execute well, with expected revenue growth of 10% to 12% and earnings growth in the low 20% area. For 2012 through 2016, as of today's data, the consensus analyst estimates are looking for the following from Starbucks in terms of annual earnings the next four years:

YearEPSGrowth
2015$4.1058%
2014$2.5922%
2013$2.1320%
2012$1.7817%

Source: Thomson Reuters' consensus estimates.

While the 2015 estimate might be a little optimistic, the fact is that Starbucks is executing. In a CNBC interview a few weeks ago, Howard Schultz noted that Starbucks "had turned the corner" with its European restructuring, which, while still vague and not a reason to bet the farm on the stock, is a positive tell for the company.

While I don't have good insight into where the next $5 trade from Starbucks will come from (i.e., which direction), the company has surprisingly attractive long-term prospects with the consumer products group (CPG) and some of the strategic moves it is making. The CPG has long been thought by analysts to be the next big growth driver of Starbucks' revenues and earnings. Between 15% and 20% of Starbucks' total operating income the last three years, the market opportunity is sizable for CPG. In a note from Deutsche Bank dated Oct. 28, 2012, an analyst said the following:

[Regarding] international CPG ... while Starbucks has a healthy consumer products biz that should generate $1.3 billion in net revenue this year, the vast majority of that revenue -- 90% -- comes from North America. In contrast, the international non-U.S. at-home coffee market is $62 billion, nearly 7 times the size of the U.S. market. The global tea market represents another $40 billion market opportunity... Clearly, the size of the opportunity is huge.

We break out the CPG on our Starbucks spreadsheet, and currently CPG is just 10% of Starbucks' total revenues. But as 15% to 20% of total operating income, you get the benefit of leverage as well.

Starbucks' valuation isn't cheap by any means, but as a reader can see from the forward estimates, the stock is trading at 21 times 2013 and 17 times 2014 estimates for pretty healthy growth. I don't like the 23 times cash flow valuation either, but a good growth stock with growth drivers might not get to 10 times cash flow.

We like the recent consolidation of the stock, although as a rule we wouldn't buy a stock like Starbucks with its valuation prior to its earnings report. In addition, should the election and the fiscal cliff create more uncertainty around consumer spending, Starbucks will feel it.

A trade below the August 2012 low of $43.04 on heavy volume and we would reconsider our position in the name, at least temporarily. Still, I like this recent technical consolidation, and I do think Starbucks works higher after earnings.

Longer term, Starbucks is one of the world's great global brands, with the CPG the next big driver. We like it and want to own more of it. (The question surrounding CPG and when it kicks in to really contribute to Starbucks is the real question.)

Click to enlarge image.

Source: Starbuck's Earnings Preview: Another Classic Growth Stock, As CPG Will Drive Future Growth