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Starbucks Stock: The Perfect Pick-Me-Up for Investors (SBUX)

Strong SBUX earnings show a fast-growing company to love

Starbucks Corporation (SBUX) delivered third-quarter results that, as usual, met Wall Street forecasts.

Starbucks Stock: The Perfect Pick-Me-Up for Investors (SBUX)But unfortunately, despite topping expectations on same-store sales, weak forward guidance had some on Wall Street worried and shares dipped after-hours.

Of course, going into the weekend shares of SBUX stock are pushing back into the green, and investors are feeling much better about the coffee king. So Starbucks stock owners shouldn’t see this modest concern about guidance as a sign of trouble.

Details from the Q4 report still show a company that is on the right track, and one that will have plenty of staying power in 2016.

Starbucks Earnings Were Mostly Strong

Here are the details:

Starbucks stock drew in 43 cents per share, up from 37 cents a year ago and in line with expectations. Sales hit $4.91 billion, up 17% from $4.18 billion in Q4 2014, and slightly above $4.9 billion in forecasts for SBUX stock.

On top of that, same-store sales were up 8% overall, topping 6.9% forecasts for the key metric.

All that looks great, but the challenge arose when Starbucks’ leadership forecasted EPS of just 44 to 45 cents in the current quarter, below the 47 cents many on Wall Street were hoping for.

On the whole, then, Starbucks posted a very strong earnings report. Results in its China/Asia Pacific were a bit soft, but more than two-thirds of Starbucks sales come from the U.S., so that’s not a huge red flag like it is for other restaurant stocks like Yum! Brands (YUM) that rely on big overseas operations to succeed.

All in all, there’s a lot to like about Starbucks earnings here.

What’s Next for Starbucks Stock?

Given some of the weakness in guidance, it is important for Starbucks to maintain its growth rate in the first quarter of fiscal 2016 and not stumble. After all, the company boasts a forward price-to-earnings of about 29 and there isn’t much room for error.

But there are reasons to be optimistic. If you’ve been in a SBUX lately, you’ve surely noticed the promotion of a mobile ordering and payment feature as a way to improve margins and sales. There’s also a continued push, albeit on a small scale, to branch out into beer and wine sales.

The million dollar question for investors, however, is whether Starbucks stock can keep supporting its high earnings multiple with continued double-digit growth. Conventional wisdom contends that there aren’t that many places to open up a new SBUX, and expansion is going to have to come from something new and different.

But with shares up over 300% in five years and up over 60% in the past year, Starbucks stock has certainly earned the benefit of the doubt in the eyes of many investors.

Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. As of this writing, he did not hold a position in any of the aforementioned securities. Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP

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Article printed from InvestorPlace Media, https://investorplace.com/2015/10/starbucks-stock-earnings/.

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