Shares of Starbucks Corporation (SBUX) hit a 52-week high of $89.21 on Jan 27.
Shares of the coffee chain have gone up more than 6% since Jan 22 when the company reported solid first-quarter fiscal 2015 results. It was the most successful holiday performance by Starbucks in more than 40 years.
Moreover, the Zacks Rank #2 (Buy) company raised the lower end of its fiscal 2015 earnings forecast.
Solid First-Quarter Results
While adjusted earnings of 80 cents per share were in line with the Zacks Consensus Estimate, Starbucks grew 16% year over year driven by solid top-line growth and margin expansion.
First-quarter sales of $4.80 billion increased 13% year over year and marginally beat the Zacks Consensus Estimate of $4.79 billion. Incremental revenues from Starbucks Japan, strong traffic trends in the American stores and improved comps in the China Asia-Pacific (CAP) segment primarily drove sales.
A strong holiday food and beverage line-up, solid performance of holiday gifting merchandise and expanded collection of Starbucks gift cards aided traffic trends at the American stores.
Last year, during the holiday season, Starbucks witnessed slower-than-expected traffic at its American stores as a result of a continued shift away from “brick and mortar” retail to online sales. As such, CEO Howard Schultz is focusing more on leveraging the mobile and digital assets as well as loyalty and e-Commerce platforms to create more revenue streams.
The success of the Starbucks card program during this holiday quarter clearly shows that the company’s efforts are paying off. Dollars loaded on Starbucks Cards surged 17% year over year to a record $1.6 billion. Moreover, one out of every seven Americans received a Starbucks gift card this season, up from one in eight in 2013.
Raised Guidance
Encouraged by a strong start to the fiscal year, Starbucks raised the lower end of fiscal 2015 adjusted earnings per share guidance by a penny. Adjusted earnings per share are now expected in the range of $3.09 to $3.13 versus $3.08 to $3.13. Revenues are still expected to grow 16–18%.
Overall, Starbucks enjoys solid fundamentals — strong global retail footprint, successful food/beverage innovations, a best-in-class loyalty program and digital offerings, rapid growth in international markets and ongoing impressive CPG growth. Moreover, its La Boulange bakery platform, new handcrafted beverages, lunch/evening program, Teavana tea and K-Cups innovations and digital efforts can fuel stronger traffic as fiscal 2015 unfolds.
Key Picks in the Sector
Other restaurateurs worth considering include Kona Grill Inc. (KONA), Jack in the Box Inc. (JACK) and Papa Murphy's Holdings, Inc. (FRSH). All these stocks sport a Zacks Rank #1 (Strong Buy).
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