Why Starbucks Is Hitting New All-Time Highs After Earnings and Target Hikes

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Starbucks Corporation (NASDAQ: SBUX) shares surged to all-time highs after its earnings report. Along with a strong capital return plan for the years ahead, Starbucks raised its financial guidance while slowing the pace of new store growth expectations.

The coffee retail giant raised its Fiscal Year 2019 guidance to $2.86 to $2.88 EPS, with adjusted EPS of $2.80 to $2.82 versus a prior target of $2.75 to $2.79 EPS. Starbucks’ adjusted operating margin was 18.3% in the last quarter.

Starbucks also targeted revenue growth of 7% for Fiscal Year 2019, up from a prior target of 5% to 7%. Its Global Comparable Store Sales growth target was put at 4%, versus a prior 3% to 4% target for the whole year.

Starbucks ended its third quarter with a total of 30,626 stores. The company has now lowered its net store openings to 2,000 from 2,100 for Fiscal Year 2019.

24/7 Wall St. tracked many analyst calls raising their price targets despite many of these calls being less optimistic now that Starbucks has seen its shares hit all-time highs.

Starbucks was maintained as Equal Weight but the target price was raised to $88 from $81 at Morgan Stanley.

Starbucks was also maintained as Equal Weight with a target hike to $90 from $72 at Stephens.

Stifel maintained its Hold rating but raised its target to $90 from $86.

Wedbush Securities maintained its Neutral rating but raised its target to $95 from $88.

KeyBanc Capital Markets reiterated its Overweight rating on Starbucks and the firm raised its price target up to $105 from $84.

Starbucks was last seen trading up 6.8% at $97.15 on Friday morning. Its prior consensus analyst target price from Refinitiv had been $86.08 ahead of the calls.

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Kevin Johnson, President and CEO of Starbucks, said:

Starbucks delivered strong operating performance in the third quarter, further demonstrating that our ‘Growth at Scale’ agenda is working. Our two targeted long-term growth markets, the U.S. and China, performed extremely well across a number of measures as a result of our focus on enhancing the customer experience, driving new beverage innovation and accelerating the expansion of our digital customer relationships. Given the strong momentum across our business, we are raising our full-year financial outlook… Starbucks continues to be focused and disciplined in the execution of our three key strategic priorities that we established last year: accelerating growth in the U.S. and China, expanding the global reach of the Starbucks brand through our Global Coffee Alliance with Nestlé, and increasing shareholder returns. With our efforts to streamline the company and elevate the Starbucks brand, we are positioning the company to deliver predictable and sustainable operating results while building an enduring company that creates meaningful long-term value for Starbucks shareholders.