Effectively, the CME is lowering the cost to trade crude oil, gold, silver, copper, and a few other commodities. So far this has had no impact on prices of the SPDR Gold Trust (NYSE: GLD), United States Oil Fund (NYSE: USO), iShares Silver Trust (NYSE: SLV), nor in the iPath DJ-UBS Copper TR Sub-Index ETN (NYSE: JJC).

In the past, margin costs were raised on traders as an effort to curb runaway trading to the upside by making it more expensive for traders and speculators to trade energy and metals.  In short, driving up the cost of poker creates fewer gamblers. So what happens when they make it cheaper to trade?

The full details are here.

JON C. OGG

The soft drink, beverage and snack maker’s net income for the fourth quarter of 2011 was up 4% to $1.42 billion.  This came to $0.89 EPS, but the pre-item report of non-GAAP came in it $1.15 EPS.  Thomson Reuters was expecting a consensus of $1.13 EPS.  The company’s sales were up by more than 10% to $20.16 billion and that was also slightly above the consensus estimate of $19.89 billion in sales.

Where the story gets interesting the layoffs: 8,700, or about 3% of the company’s work force.  The job cuts are part of a cost-cutting strategy aimed to save $1.5 billion over the next three-years.  It also comes on top of what is said to be a higher push in marketing and advertising.

Cost pressure and a move toward healthier drinks have been a challenge.  Pepsi closed at $66.74 and the 52-week range is $58.50 to $71.89.  Shares are indicated down about 1% ahead of the opening bell.   Investors are currently leaning more toward Coca-Cola Company (NYSE: KO).

JON C. OGG

The company beat earnings by $0.05 at $0.65 per share and revenues rose almost 13% to $3.39 billion versus Thomson Reuters estimates of $3.38 billion.  Whole Foods even raised guidance for its Fiscal year of 2012 to a range of $2.28 to $2.32 earnings per share from a prior target of $2.21 to $2.26 and against a consensus target from Thomson Reuters of $2.27 EPS.  It also raised revenue guidance for 2012 to a range of 13.5% to 15% and that looks mostly in-line with the expected figure of $11.6 billion expected.

Whole Foods is a great growth story, it is an incredibly well run organization, and it deserves a premium over traditional grocery stores which run on razor-thin margins.  Whole Foods has far higher margins and its expansion of its own 365 private-label brand is likely going to help it capture even higher margins even though the products are generally priced lower than other organic and natural brand-label foods. 

So, everything is positive… except for our headline.  The guidance is not exactly far higher than what was already expected.  At the mid-point of its new earnings range, Whole Foods stock trades at a massive 33.9-times the fiscal September 2012 consensus estimate and it trades at 1.2-times expected revenues.

Compare Whole Foods forward 2012 valuations of 33.9-times earnings and 1.2-times sales to The Kroger Company (NYSE: KR) and Safeway Inc. (NYSE: SWY).  Kroger trades at only 10.6-times earnings and only about 0.14-times sales; Safeway trades at 12-times expected earnings and only 0.17-times total sales.
 
The good news for the bulls is that Whole Foods has always been a premium stock.  It is even easy to argue that Whole Foods will always trade at a premium to grocery chains.  It has the whole lifestyle trade attached to it.  Whole Foods is far more of a fun experience compared to most grocery stores, at least until the bill comes.  Whole Foods is arguable the biggest luxury brand that there is. 

The bad news is simple.  Valuations at some point just have to give.  At $77.93 and after the stock hit a new high of $78.31, how can it rise?  The consensus target from analysts is $79.29 and even if that gets raised it can only rise so much.  With a $13.99 billion market cap, it is worth roughly two-thirds of the combined values of Safeway and Whole Foods while it is expected to generate only about 8% of the combined sales of the two food giants.

A great company, at a price that just feels too high to justify on any traditional financial metrics.  The stock can run up on news.  It just looks too hot now under rational evaluations.

JON C. OGG

For all of 2011 there was a 5% total case volume growth for the beverage giant, with Europe up 1% and China up 10%.  North America’s organic case volume was up only 1% in the period.  For the Year…  Full-year EPS of $3.69 and $3.84 EPS on an adjusted basis.  The 10% growth is said to be “both ahead of our long-term growth target.”

Coke is also launching a new Productivity and Reinvestment program that aims for annualized savings of $550 to $650 million by the end of 2015 as part of its 2020 Vision.

Shares closed at $68.03 on Monday and the 52-week range is $61.29 to $71.77; shares are up 1.3% at $68.90 so far in the pre-market with almost two hours until the market opens for trading.

JON C. OGG

One reason Walmart suddenly has taken the action is First Lady Michelle Obama, the poster child for the new initiative. Walmart went so far as to get a quote from her for its press release about Great for You. She said:

 Today’s announcement by Walmart is yet another step toward ensuring that our kids are given the chance to grow up healthy. Just over a year ago, Walmart committed to save shoppers a billion dollars in their cost of fruits and vegetables and the fact that Walmart exceeded this number is a real accomplishment and a milestone in our efforts to support families eating better. In addition, the healthy seal will be another tool for parents to identify the best products for their kids. Giving parents the information they need to make healthy choices is a key piece of solving childhood obesity.

The quality of Walmart food products probably was never an issue for her and her family. Mrs. Obama did not mention it, but she likely was never a regular patron of Walmart. She almost certainly is not now, either.

The Walmart decision matches ones made by other huge American companies that sell food, either fast food or food that people take home to cook. McDonald’s (NYSE: MCD) is the best example. Last summer, the largest fast-food chain said it would offer low-calorie options for children’s meals. McDonald’s also said it would reduce sodium content in some of its food by 15% by 2015.

Stores and fast-food companies have tried to create the illusion that they have only recently gotten the FDA list of food content by product and studies about which food ingredients undermine healthy eating habits. What actually happened is that pressure from the government and public to cut back on the fatty foods that people love most became overwhelming. Some of the blame for unhealthy foods does fall with the customers. But to turn what should have been done some time ago into a press event masks a lack of actions — ones not taken by these companies for years.

Douglas A. McIntyre

The company has already increased its annual dividend rate to $1.14 per share and its 2011 earnings are $2.74 EPS.  It also repurchased 14.3 million shares totaling $733 million at an average price of $51.00 per share.

Worldwide system sales grew 11% before currency translation in the quarter, but this was a gain of about 33% in China.  The international growth was 10% versus 6% growth in the united States.  Same-store sales grew 21% in China, 3% in all international and only 1% in the U.S.  Worldwide restaurant margin declined 1.1 percentage points to 14.3%.

The company did note that results for Yum! Restaurants International and the U.S. reflect the benefit of an additional week, but noted that this 53rd week did not impact China Division results.

Yum! Brands closed down 1% at $63.19 but the after-hours reaction is up 2.3% at $64.70.  Keep in mind that $64.75 is its 52-week high AND its all-time high.

JON C. OGG

For 2012 the company “has raised its expectation for earnings per share to a range of $1.78 to $1.82 representing 17% to 20% growth over the $1.52 EPS in FY11, excluding the non-routine gains. EPS growth is expected to be approximately 10% in the first half of FY12 and approximately 25% in the second half of FY12.”

Starbucks noted that it “continues to target 10% revenue growth on mid-single digit comparable store sales growth.  The company is also maintaining that it will have 50 to 100 basis points margin improvement over fiscal 2011.

The coffee giant reported also that its global comparable store sales rose by roughly 9%, after a 7% traffic rise and a 2% higher sales price gain.

Another note is that Starbucks opened 241 net new stores globally.  The company now has 500 stores in both mainland China and Latin America. For 2012, the company is targeting 400 new stores in the Americas, 300 stores in Asia/Pacific, and 100 stores in the EMEA regions.

As far as the deal with Green Mountain Coffee Roasters, Inc. (NASDAQ: GMCR), the Starbucks report said that more than 100 million Starbucks- and Tazo-branded K-Cup packs shipped in the first quarter after the November 1 launch date.

Some investors may be puzzled that the stock is not higher.  Frankly, it is holding up fine (all things considered) as the valuation has to catch up to its share price.  Shares rose 1.2% today to $48.34 and it hit an all-time high of $48.49.  Shares are now down 1.2% at $47.80 in the after-hours session.

As we noted earlier, this is close to analyst consensus targets and it trades at 26-times this year’s expected earnings now.

JON C. OGG

Green Mountain Coffee Roasters, Inc. (NASDAQ: GMCR) is often considered a rival despite the K-Cup relationship now. The downstream companies to watch after Starbucks reports earnings are Peet’s Coffee & Tea, Inc. (NASDAQ: PEET) and Caribou Coffee Company, Inc. (NASDAQ: CBOU).  Peet’s is up more than 50% off of its year lows and Caribou has roughly doubled from its year lows.

The company slowed its domestic growth massively in its turnaround, it has committed again to price hikes, and now it is even targeting the after-work crowd by offering beer, wine, and premium food items on a test basis in a few spots in America later this year.  That effort is too soon to judge.  Even a logo change had no negative impact.

Thomson Reuters has estimates of $0.49 EPS versus $0.45 a year ago, and revenue estimates are expected to be up more than 11% at $3.29 billion.  Estimates for the current quarter due in about 90 days are $0.38 EPS versus $0.34 a year earlier and on sales growth of almost 12% to $3.12 billion.

The chart offers little read for guidance since the stock hit all-time highs lately.  The moving average to watch are as follows: 20-day at $47.04; 50-day at $44.86; and 200-day at $39.81. 

Options traders appear to be braced for a move of up to about $1.40 or so in either direction if you use the February expiration.

As far as analysts and the current price of $47.78, the consensus target from Thomson Reuters is $48.71 and the 52-week range is $30.75 to $48.39.  Our take is that valuations are reaching a point that analysts may downgrade the stock on valuation unless the company blows the doors off the handle.

Still, this one has gone above and beyond what we expected as a peak value.  Thomson Reuters has September year-end estimates of $1.83 EPS for 2012 and $2.23 EPS for 2013.  That generates non-GAAP ratios of 26-times expected earnings for this year ahead and 21.5-times expected 2013 earnings.

JON C. OGG

Fourth quarter global comparable sales rose by about 7.5%, and that s-s-s report for the United States came to 7.1% in the quarter.  Europe somehow managed growth of 7.3%, indicating that perhaps default stress sell hamburgers and fires.  The sales in Asia/Pacific, Middle East and Africa were up 6.9%.

U.S. was the driving force somehow, another move at least somewhat tied to dollar strength and international uncertainty with annual comparable sales performance coming in the best since 2006.

The company is signaling that January sales are expected to remain strong at +5.5 to +6.5%.

McDonald’s stock is up only about 0.5% at $101.45 on not very active early trading volume against a 52-week range of $72.89 to $102.22.  Keep in mind that the new high that recently put in was an all-time high.

JON C. OGG

One percent may not seem like much until the price of a Starbucks order is taken into account. Coffee drinks and food can come at prices of $5 or better, so there is some risk in the decision.

But Starbucks has the weight of recent success behind it. After a terrible 2008 and 2009, due to overexpansion, Starbucks revenue more than bounced back in 2010 and 2011. Shares trade at nearly $43, just below the firm’s 52-week high. The stock was below $9 in late 2008.

It is hard to say what Starbucks has done so well, but it has worked. Some analysts believe that CEO Howard Schultz has set clever merchandising plans. This includes more healthy offerings, as well as more foods. Starbucks also markets instant coffee now, under the Via brand, and has expanded more of its business to retail companies outside of its stores.

Starbucks also has branched into some odd businesses that are not coupled with it core. Schultz led a move to withhold contributions to national politicians and set up a program for customers to donate to a fund to help increase American employment. Customers seem to have completely ignored these as eccentricities. People come to Starbucks stores for coffee. The balance of what the firm pushes has not phased them.

Every American retailer or company that sells products to consumers would like to raise prices. Almost none have, because they cannot do so without hurting sales. Starbucks, however, has managed itself into a position where it takes little risk as it moves to increase its margins.

Douglas A. McIntyre