Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Starbucks: Consistent Growth despite Challenges

Stock MarketsSep 17, 2021 07:30PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. Starbucks: Consistent Growth despite Challenges

Starbucks Corporation (NASDAQ:SBUX) is one of the most iconic consumer brands in the world, counting more than 33,200 stores globally.

The company purchases and roasts high-quality coffees, which it sells together with handcrafted tea, and a mixture of high-quality food items through both its company-operated and franchised stores.

In addition to its flagship Starbucks Coffee brand, the company offers its food and beverages through its other brands, including Teavana, Seattle's Best Coffee, Evolution Fresh, Ethos, Starbucks Reserve, and Princi.

While Starbucks was notably impacted by the adverse impact of COVID-19 in the retail and restaurant industries, the company managed to not only sustain robust results, but actually come out stronger.

While the stock is up 37.3% over the past 12 months, Starbucks likely remains an attractive dividend growth play, considering its ongoing developments. I am bullish on the stock. (See SBUX stock charts on TipRanks)

An Improving Performance

In late July, Starbucks reported its Q3 2021 results, with numbers coming in strong. Net revenues were $7.5 billion, suggesting a 78% increase versus the comparable period last year.

Specifically, global comparable sales grew 73%, powered by a 75% growth in comparable transactions, slightly offset by a 1% drop in each average ticket.

The massive increase in sales was attributed to COVID-19-related restrictions easing globally, and consumers' spending habits returning to normal. To put Starbucks' recovery into perspective, the $7.5-billion Q3 revenues were the highest quarterly revenues in the company's history.

Consequently, adjusted earnings per share came in at $1.01 against a loss of $0.46 in Q3 2020, due to the one-off expenses the company had to undertake in the midst of the pandemic.

In parallel with the company's recovery, Starbucks continued to expand its global presence. During the quarter, Starbucks opened 352 net new stores, lifting its total locations to 33,295 stores globally. Of these, 50.6% and 49.4% were company-operated and licensed, respectively.

Management felt confident enough to hike its FY2021 guidance, expecting 18% to 21% global comparable sales growth, and reiterated around 2,150 new store openings.

The company now expects $29.1 billion to $29.3 billion in net revenue (previously $28.5 billion to $29.3 billion), and adjusted EPS of $3.20 to $3.25 (previously $2.90 to $3).

Valuation, Dividend Growth

At its current share price, Starbucks is trading at around 35 times management's EPS guidance. That's notably higher than the stock's historical average. Then again, analysts expect double-digit EPS growth in the medium-term, which somewhat explains the current premium.

Robust EPS growth in the medium-term should also be able to sustain Starbucks' double-digit DPS growth. The company's three-year DPS CAGR (Compound Annual Growth Rate) stands at 12.6%. At its current annual DPS of $1.80, the payout ratio comes at 55% at the midpoint of management's guidance.

Hence, future hikes should be rather comfortable, combined with Starbucks' expected EPS growth. The current yield of 1.51% is not that enticing, but considering the company's growth prospects, it makes for a nice addition, in terms of the stock's total shareholder return potential.

Wall Street’s Take

Turning to Wall Street, Starbucks has a Moderate Buy consensus rating, based on 13 Buys, five Holds, and zero Sells assigned in the past three months. At $132.23, the average SBUX price target implies 16.6% upside.

Disclosure: At the time of publication, Nikolaos Sismanis did not have a position in any of the securities mentioned in this article.

Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates, and should be considered for informational purposes only. TipRanks makes no warranties about the completeness, accuracy or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. TipRanks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by TipRanks or its affiliates. Past performance is not indicative of future results, prices or performance.

Starbucks: Consistent Growth despite Challenges
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email