Starbucks is One New Buy for June

by Louis Navellier | June 7, 2012 1:30 pm

Starbucks185 Starbucks is One New Buy for JuneStarbucks (NASDAQ:SBUX[1]) is the coffee powerhouse that took the U.S. by storm, and Starbucks’ growth is now heating up around the world. The company has a presence in more than 50 countries and is seeing the largest growth in its global stores, especially in Asia-Pacific. Sales in the region were up a whopping 18% in the first quarter, and the company is increasing its targeted new store openings in Asia this year to 400 from 300, with half of those new stores placed in China.

Not to mention that its instant-serve and single-serve business[2] is heating up. The company’s Via and K-cup packs have been very successful, and Starbucks estimates that K-Cup sales will contribute between 3 cents per share and 5 cents per share to its full-year 2012 earnings per share — with even greater potential in this business segment in the future.

It’s no surprise that the company continues to innovate[3]. In fact, it is now experimenting with featuring beer and wine at selected locations in Atlanta, Chicago, Los Angeles and Seattle, due to customer demand. In the meantime, coffee continues to dominate the company’s business, and now that coffee prices are falling, Starbucks’ operating margins are expected to continue to improve.

And if that isn’t enough of a reason to love the company and want to buy shares, demand may be picking up thanks to a new study published in The New England Journal of Medicine. The study of 400,000 people found that coffee isn’t as bad for you as first thought and that a cup a day might actually help you live longer — just make sure to skip all the sugary extras.

Even when you don’t take into account the health benefits, in the past four quarters, the company’s sales have risen 12.6%, and its earnings rose by 30.7%. Looking forward to the second quarter, the analyst community is expecting Starbucks’ annual sales growth of 13% and earnings growth of 27.8%. In the past month, nine analysts have revised their consensus earnings estimate higher. Typically, strong analyst earnings revisions precede future earnings surprises.

Even better, the stock’s 15% pullback from its recent April all-time high presents us with an excellent buying opportunity, and I recommend that you add shares of this Conservative stock.

Endnotes:
  1. SBUX: http://navelliergrowth.investorplace.com/bluechip/stock-report/?sym=SBUX
  2. single-serve business: http://investorplace.com/2011/02/starbucks-sbux-k-cup-single-serve-coffee-green-mountain-gmcr-kraft/
  3. the company continues to innovate: http://investorplace.com/2012/06/starbucks-serving-a-venti-cup-of-desperation/

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