On Mar 5, we maintained a Neutral recommendation on
), following its fiscal-first quarter 2013 results, which were in
Why the Neutral Recommendation?
The coffee giant's fiscal-first quarter 2013 earnings of 57
cents per share were in line with the Zacks Consensus Estimate.
Earnings grew 14% year over year, almost in line with
management's expectation of being at the lower end of its
full-year growth range of 15%-20%. Earnings growth was driven by
solid top-line performance and lower taxes, which made up for the
unusual cost pressures in the quarter.
Solid comps, strong holiday performance in the U.S.,
significant innovation, further expansion in China and Asia
Pacific and continued momentum in the Channel Development segment
drove the 11% top-line growth in the quarter.
Following the flat first-quarter results, the company
maintained its previously provided outlook for 2013.
The Zacks Consensus Estimates have seen a mixed movement
following the in line results. While those for fiscal 2013 have
mostly moved upwards, estimates revisions for fiscal 2014 have
seen a mixed trend. Overall, the Zacks Consensus Estimate for
both fiscal 2013 and 2014 has remained stagnant over the last 60
Overall, we are encouraged by Starbucks' strong market
standing, new product launches, rapid growth in China, the
flourishing CPG business as well as the solid turnaround in its
U.S. business. We believe that the company has compelling growth
drivers like La Boulange, Verismo, Teavana and K-Cups to sustain
earnings momentum in the next few quarters.
However, poor sales in Europe due to the depressed
macroeconomic conditions keep us on the sidelines. In the U.S.,
though some signs of modest economic recovery and improving
consumer confidence can be seen, there is still great uncertainty
as the fiscal cliff looms. 2013 is also not expected to see any
robust economic growth in the U.S.
Other Stocks to Consider
Starbucks carries a Zacks Rank #3 (Hold). Some other
retail/restaurant stocks worth considering include
Red Robin Gourmet Burgers Inc.
) - Zacks Rank #1 (Strong Buy),
Krispy Kreme Doughnuts, Inc.
) -Zacks Rank #2 (Buy), and
Dunkin' Brands Group, Inc.
) - Zacks Rank #2 (Buy),
DUNKIN BRANDS (DNKN): Free Stock Analysis
KRISPY KREME (KKD): Free Stock Analysis
RED ROBIN GOURM (RRGB): Free Stock Analysis
STARBUCKS CORP (SBUX): Free Stock Analysis
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