Six more countries will enjoy sipping instant coffee by next September – offered in single serving packets named ‘Via’ by Starbucks Corp. (SBUX). Starbucks stores in South Korea, Indonesia, Malaysia, Singapore, Thailand and Australia will now offer Starbucks VIA Ready Brew.
It has already been introduced in China, Japan, the Philippines, the U.K., and the U.S. Starbucks successfully introduced the coffee brewer in China, Hong Kong, and Taiwan in April 2011.
Introduction of ‘Via’ in countries outside U.S.enhances the global presence of the company and helps retain its leadership position. The company has decided to improve the ‘Via’ portfolio by adding some more like Starbucks VIA Flavored Coffee, Starbucks VIA Iced Coffee, Starbucks VIA Christmas Blend and Starbucks VIA Tribute Blend.
The Starbucks ‘Via’- Ready Brew is made from 100% arabica instant and micro ground coffee that is rich and full-bodied in flavor, like any other freshly-brewed cup of coffee offered by Starbucks.
Starbucks registered robust results for the third quarter of fiscal 2011. Quarterly earnings soared 33% year over year to 36 cents a share. It also outpaced Zacks Estimate of 34 cents by 5.8%.
The management gave credit to the company’s organizational capabilities and its remarkable collaborations around the world for pushing up profits in the quarter. Apart from this, the strong traffic gains across stores could not be denied of having contributed to the growth.
The company raised its fiscal 2011 earnings guidance to the range of $1.50 to $1.51, from the previously communicated 15% to 20% growth over fiscal 2010 non-GAAP EPS on a comparable 52-week basis.
For fiscal 2012, Starbucks estimates earnings to be in the range of 15% to 20%, consistent with its long-term outlook. The estimate takes into account the unfavorable impact of approximately $0.21 attributable to higher coffee bean costs.
Starbucks has been focusing on foreign markets for additional growth. The company’s policy is unlike its rival Green Mountain Coffee Roasters (GMCR) which relies almost entirely on the U.S. market.
Recommendation
Starbucks operates in a highly competitive market. Moreover, labor unions pose inherent risks for the company and the company’s high dependence on information technology also remains a concern.
Currently, we prefer to rate the stock as Neutral. Starbucks holds the Zacks #4 Rank, which translates into a short-term Sell rating.
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