Starbucks: A 2012 Turn Around Story

| About: Starbucks Corporation (SBUX)

After having a mixed performance this year, where share prices surged in the spring and fell off in the summer, Starbucks (NASDAQ:SBUX) appears to be back and better positioned for success. This last quarter the company performed terrifically and hiked up the dividend as well. What effect did this latest quarter have on stock price? Starbucks share price soared over 9% to close at $50.84.

The conference call was extremely impressive. Starbuck's CEO Howard Schultz outlined some of the company's focuses for 2013 and beyond. He stated that the company will try to increase sales of its consumer goods business including products such as Via Instant Coffee Packs, K-cups, Tazo tea, and packaged coffee bags. Starbucks will also look to expand sales of its newly acquired Evolution Fresh and La Boulangerie chains. Evolution Fresh is a juice chain and La Boulangerie is a bakery chain. They will both be crucial to adding to Starbuck's value as the company looks to become more than just a coffee based beverage company.

Starbucks earnings beat Wall Street estimates by 1 cent after earnings came in at 46 cents per share for Q4. Store sales also jumped 6% and operating margins grew at a double digit clip. Much of the company's success can be attributed to China in which they have over 700 shops and growing. This quarter Starbucks added a total of 415 new stores worldwide.

Some of the fiscal highlights from the conference call were rather impressive. Starbuck's Q4 net revenue increased 11% from last year jumping from $3031 billion to $3.364 billion. Operating income grew 15.9% from $448.3 million to $519.6 million. Once again Starbucks attributed much of this growth to increased global store sales.

Despite the 9% jump in share price after the quarterly results, Starbucks is still a buy. The company fell off earlier in the year after growth slowed. People panicked and the share price fell but the company rebounded in a big way which shows that their management is aware of how to make the right changes to redirect their company in the right direction. Boosting the dividend by 24% is another good sign of company strength.

Starbuck's management earned my faith because whenever a company can follow a poor quarter with a much better one it shows the managements experience. Due to the poor share performance earlier in the year, Starbuck's shares are currently at a discount from where they could've been. $50 is a decent entry price to buy shares of Starbucks, because it offers over a 20% upside potential of where analysts believe the price could be. I might wait a little before buying any stock for a while though until the market settles after the election results last week.


I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Tagged: , Specialty Eateries, Earnings
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