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Retail

Starbucks, The Turnaround Has Fully Turned Around (SBUX)

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By Jon C. Ogg Updated Published
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Starbucks Corp. (NASDAQ: SBUX) may have won over some new investors with its dividend announcement last month, but so far it looks to be winning over people with earnings despite a 150% gain from trough to peak in the last bull market cycle.  The company beat earnings and raised guidance, and shares are so far responding.

Its non-GAAP operating margins came in at 17.8%, a considerable improvement from 10.4% a year ago.  The turnaround is working.  Lower store costs, better sales leverage, higher productivity (more work from fewer hands) and closing underperforming stores all contributed.

Starbucks reported $0.29 EPS vs. $0.25 EPS expected; revenues rose over 8% to $2.53 billion vs. $2.41 billion expected. For 2010, it now sees earnings of $1.19 to 1.22 EPS, up from its previous $1.05 to $1.08 range and above the Thomson Reuters $1.12 EPS consensus estimate.

Starbucks closed up 0.5% at $25.39 today, and the 52-week range is $11.20 to $26.00.  We have shares up 1% at $25.66 in the after-hours session.  Valuation may still be a concern going forward, but either way it impossible not to expect analysts to raise their earnings expectations for 2010 and 2011 tomorrow.

JON C. OGG

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About the Author Jon C. Ogg →

Jon Ogg has been a financial news analyst since 1997. Mr. Ogg set up one of the first audio squawk box services for traders called TTN, which he sold in 2003. He has previously worked as a licensed broker to some of the top U.S. and E.U. financial institutions, managed capital, and has raised private capital at the seed and venture stage. He has lived in Copenhagen, Denmark, as well as New York and Chicago, and he now lives in Houston, Texas. Jon received a Bachelor of Business Administration in finance at University of Houston in 1992. www.247wallst.com.

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