Starbucks Corporation (NASDAQ: SBUX) – Q2 Earnings Preview
Tuesday, April 26, 2011 12:38 PM

Starbucks Corporations (NASDAQ: SBUX), which fancies itself coffeehouse to the world, is expected to report its Q2 FY 2011 earnings on April 27, 2011. In the last four quarters, Starbucks reported earnings exceeded analysts' consensus estimates for quarters ended March 2010, September 2010 and December 2010, by margins of 16 percent, 15.60 percent and 15.40 percent, respectively. For quarter ended June 2010, the company's reported earnings met analysts' consensus estimate of $0.29 per share.

The company specializes in the purchase, roasting, and sale of whole bean coffees worldwide Starbucks products include brewed coffees, espresso beverages, cold blended beverages, various complementary food items, coffee-related accessories and equipment, a selection of premium teas, and a line of compact discs through its retail stores.

In the first quarter ended December 2010, Starbucks reported revenues of $2.95 billion, up 8 percent, compared with revenues of $2.72 billion reported for the same period last fiscal. For the quarter, the company reported income of $501.9 million, or $0.45 per share, compared with income of $352.6 million, or $0.32 per share, representing an increase of 42 percent and 41 percent, respectively.

Based on the record earnings and revenues for the first quarter, Starbucks revised its FY 2011 financial targets. The company now expects EPS of $1.44 to $1.47, reflecting 15 percent to 20 percent growth over fiscal 2010 non-GAAP EPS on a 52-week basis. No restructuring charges are anticipated in fiscal 2011. The company also expects EPS for fiscal Q2 and Q3 to be in the range of $0.32 to $0.33 in each period, and EPS in fiscal Q4 is expected to be approximately $0.35 to $0.36.

During the second quarter, Starbucks Corporation and Green Mountain Coffee Roasters Inc. (Nasdaq: GMCR) a leader in specialty coffee and single-serve brewing systems, entered into a strategic relationship for the manufacturing, marketing, distribution and sale of Starbucks and Tazo tea branded K-Cup portion packs for use in GMCR's Keurig Single-Cup brewing system. The new relationship will provide owners of Keurig Single-Cup Brewers with the additional choice afforded by having Starbucks branded super-premium coffees available for their brewers, and furthers Starbucks stated goals of expanding its presence in premium single-cup coffee, making its premium coffees conveniently available to consumers whenever, wherever and however they want it.

In March 2010, Starbucks declared its first ever cash dividend to shareholders at $0.10 per share. This quarterly dividend was paid on April 23, 2010. The third quarter dividend was raised to $0.13 per share and was paid on August 20, 2010, bringing the total cash dividend payout for fiscal 2010 to $171 million. For the first quarter FY 2011, the company paid its regular cash dividend of $0.13 per share to its shareholders. Starbucks repurchased 11 million shares of common stock for $286 million during fiscal 2010 under share repurchase authorizations.

Starbucks has a market capitalization of $26.71 billion. In comparison with the industry, the company has a P/E ratio of 26.14, which is marginally lower than the industry's average P/E of 26.56. The quarterly revenue growth of SBUX is 8.40 percent, compared with the industry's growth of 20.90 percent. The P/B and P/S ratio of the company is 6.62 and 2.44, respectively, compared with the industry's P/B and P/S ratio of 7.01 and 2.48, respectively. The net profit margin of the company is 11.75 percent, higher than industry's average margin of 8.50 percent. The ROE of the company is 28.35 percent, higher than that of the industry's ROE of 24.60 percent.

For the second quarter, analysts' EPS estimates range from a low of $0.31 to a high of $0.36 per share, compared with consensus estimate of $0.34 per share, or $0.29 per share in the year ago quarter. For this quarter, analysts' revenue estimates range from a low of $2.64 billion to a high of $2.80 billion, compared with a consensus estimate of $2.73 billion to $2.53 billion in the same quarter a year ago. For the quarter ended March, 2011, the consensus EPS forecast has remained unchanged for the last 60 days at $0.34 per share.

In the last 52 weeks, Starbucks Corp.'s shares have been trading in the range of $22.50 to $38.21. The last trading price of the stock was $36.16 on April 19, 2011, on the Nasdaq Stock Exchange. On March 7, 2011, analysts at Morgan Stanley upgraded SBUX rating to overweight from equal weight.



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