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Category: Stock Market and Starbucks
Date: 24 August 2019 Stock Price: $94.70 We take a look at the latest financial results from Starbucks for the 3rd quarter of 2019. Does the stock offer value at its current price or has its share price run to far in recent times?
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About Starbucks
For those that don't know anything about Starbucks below a bit more detail regarding the group as obtained from their website
The Starbucks Story
Our story began in 1971. Back then we were a roaster and retailer of whole bean and ground coffee, tea and spices with a single store in Seattle’s Pike Place Market. Today, we are privileged to connect with millions of customers every day with exceptional products and more than 30,000 retail stores in 80 markets.
Folklore
Starbucks is named after the first mate in Herman Melville’s Moby Dick. Our logo is also inspired by the sea – featuring a twin-tailed siren from Greek mythology
.
Starbucks Mission
Our mission: to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.
Our Coffee
We’ve always believed in serving the best coffee possible. It's our goal for all of our coffee to be grown under the highest standards of quality, using ethical sourcing practices. Our coffee buyers personally travel to coffee farms in Latin America, Africa and Asia to select high quality beans. And our master roasters bring out the balance and rich flavor of the beans through the signature Starbucks Roast.
Our Stores
Our stores are a neighborhood gathering place for meeting friends and family. Our customers enjoy quality service, an inviting atmosphere and an exceptional beverage. Total stores: 30,000 across 80 markets (as of June 30, 2019)
Our Partners
We offer some of the finest coffees in the world, grown, prepared and served by the finest people. Our employees, who we call partners, are at the heart of the Starbucks Experience. We believe in treating our partners with respect and dignity. We are proud to offer several landmark programs for our partners, including comprehensive health coverage for eligible full- and part-time partners, access to full college tuition coverage through the Starbucks College Achievement Plan, and equity in the company through Bean Stock.
Our Products
Starbucks offers a range of exceptional products that customers enjoy in our stores, at home, and on the go.
Coffee: More than 30 blends and single-origin premium coffees.
Handcrafted Beverages: Fresh-brewed coffee, hot and iced espresso beverages, Iced Coffee, Cold Brew, Nitro, Frappuccino® coffee and non-coffee blended beverages, Starbucks Refreshers® beverages, and Teavana® teas.
Merchandise: Coffee- and tea-brewing equipment, mugs and accessories, packaged goods, books and gifts.
Fresh Food: Baked pastries, cold and hot sandwiches, salads, salad and grain bowls, oatmeal, yogurt parfaits and fruit cups.
Consumer products available where groceries are sold
Starbucks Coffee, Seattle’s Best Coffee, Teavana, Evolution Fresh, Ethos Water and Torrefazione Italia Coffee.
Investor Information
The Starbucks Story
Our story began in 1971. Back then we were a roaster and retailer of whole bean and ground coffee, tea and spices with a single store in Seattle’s Pike Place Market. Today, we are privileged to connect with millions of customers every day with exceptional products and more than 30,000 retail stores in 80 markets.
Folklore
Starbucks is named after the first mate in Herman Melville’s Moby Dick. Our logo is also inspired by the sea – featuring a twin-tailed siren from Greek mythology
.
Starbucks Mission
Our mission: to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.
Our Coffee
We’ve always believed in serving the best coffee possible. It's our goal for all of our coffee to be grown under the highest standards of quality, using ethical sourcing practices. Our coffee buyers personally travel to coffee farms in Latin America, Africa and Asia to select high quality beans. And our master roasters bring out the balance and rich flavor of the beans through the signature Starbucks Roast.
Our Stores
Our stores are a neighborhood gathering place for meeting friends and family. Our customers enjoy quality service, an inviting atmosphere and an exceptional beverage. Total stores: 30,000 across 80 markets (as of June 30, 2019)
Our Partners
We offer some of the finest coffees in the world, grown, prepared and served by the finest people. Our employees, who we call partners, are at the heart of the Starbucks Experience. We believe in treating our partners with respect and dignity. We are proud to offer several landmark programs for our partners, including comprehensive health coverage for eligible full- and part-time partners, access to full college tuition coverage through the Starbucks College Achievement Plan, and equity in the company through Bean Stock.
Our Products
Starbucks offers a range of exceptional products that customers enjoy in our stores, at home, and on the go.
Coffee: More than 30 blends and single-origin premium coffees.
Handcrafted Beverages: Fresh-brewed coffee, hot and iced espresso beverages, Iced Coffee, Cold Brew, Nitro, Frappuccino® coffee and non-coffee blended beverages, Starbucks Refreshers® beverages, and Teavana® teas.
Merchandise: Coffee- and tea-brewing equipment, mugs and accessories, packaged goods, books and gifts.
Fresh Food: Baked pastries, cold and hot sandwiches, salads, salad and grain bowls, oatmeal, yogurt parfaits and fruit cups.
Consumer products available where groceries are sold
- Coffee and Tea: Whole bean and ground coffee (Starbucks and Seattle’s Best Coffee brands), Starbucks VIA® Instant, Starbucks espresso capsules available on the Nespresso and Nescafé Dolce Gusto systems, Starbucks® Coffee K-Cup® pods, Starbucks® and Teavana® Verismo® pods.
- Ready-to-Drink (RTD): Starbucks® bottled Frappuccino® coffee drinks, Starbucks Iced Latte, Single Serve Cold Brew, Doubleshot® Coffee Smoothies, Teavana Craft Iced Teas, Teavana Sparkling Craft Iced Teas, Starbucks Discoveries® chilled cup coffees, Starbucks Discoveries Iced Café Favorites®, Starbucks Iced Coffee, Starbucks Doubleshot® espresso drinks, Starbucks Doubleshot® Energy Coffee drinks; Starbucks Refreshers® beverages, Evolution Fresh™ bottled juices.
Starbucks Coffee, Seattle’s Best Coffee, Teavana, Evolution Fresh, Ethos Water and Torrefazione Italia Coffee.
Investor Information
- Starbucks went public on June 26, 1992 at a price of $17 per share (or $0.53 per share, adjusted for subsequent stock splits) and closed trading that first day at $21.50 per share.
- Starbucks was incorporated under the laws of the State of Washington, in Olympia, Washington, on Nov. 4, 1985.
- Starbucks Corporation's common stock is listed on NASDAQ, under the trading symbol SBUX.
Financial overview
Now that we know a bit more about Starbucks lets take a look at their latest set of financial results
Numbers highlighted by Starbucks management:
Q3 Fiscal 2019 Highlights
Numbers we are interested in:
Numbers highlighted by Starbucks management:
Q3 Fiscal 2019 Highlights
- Global comparable store sales increased 6%, driven by a 3% increase in average ticket and a 3% increase in comparable transactions
- Americas comparable store sales increased 7%, driven by a 4% increase in average ticket and a 3% increase in transactions; U.S. comparable store sales increased 7%, with transactions up 3%
- China/Asia Pacific comparable store sales increased 5%, driven by a 3% increase in average ticket and a 2% increase in transactions; China comparable store sales increased 6%, with transactions up 2%
- The company opened 442 net new stores in Q3, yielding 30,626 stores at the end of the quarter, a 7% increase over the prior year. Nearly one-third of net new store openings were in China and 48% were in other international markets • Consolidated net revenues of $6.8 billion grew 8% over the prior year
- Consolidated net revenues grew 11% over the prior year adjusted for unfavorable impacts of approximately 2% from Streamline-driven activities and 1% from foreign currency translation
- Streamline-driven activities include the licensing of our CPG and foodservice businesses to Nestlé following the close of the transaction on August 26, 2018, and the conversion of certain international retail operations from company-operated to licensed models
- GAAP operating margin, inclusive of restructuring and impairment charges, declined 10 basis points yearover-year to 16.4%, primarily due to partner (employee) investments, largely in the Americas segment, licensing of our CPG and foodservice businesses to Nestlé, product mix and higher inventory reserves, 2 - more - partially offset by sales leverage, cost savings initiatives and the adoption of new revenue recognition accounting for stored value card (SVC) breakage
- Non-GAAP operating margin of 18.3% declined 20 basis points compared to the prior year. Excluding a 70-basis point unfavorable impact from Streamline-related activities, non-GAAP operating margin expanded by approximately 50 basis points
- GAAP Earnings Per Share of $1.12, up 84% over the prior year ◦ Non-GAAP EPS of $0.78, up 26% over the prior year, inclusive of a $0.03 benefit from discrete income tax items
- The company returned $581 million to shareholders through a combination of share repurchases and dividends
- Starbucks® Rewards loyalty program grew to 17.2 million active members in the U.S., up 14% year-over-year
Numbers we are interested in:
- Net revenues: $6,823.0 billion (up 8.1% from $6,310.3 compared to the prior year)
- Operating income: $1,121.3 billion (up 8% from $1,038.2 compared to the prior year)
- Net earnings: $ 1,372.8billion (up 61% from $ 852.5 million in the prior year)
- Diluted earnings per share: $1.12 (up 83.6% from $0.61 in the prior year)
- Dividend per share for the quarter: $0.36, the same as reported and paid in the prior year
- Effective tax rate: 18.1% up from 17% in the prior year
- Cash generated from operations: $3,938.8 billion
- Cash generated from operations per share: $3.22 a share
- Cash and equivalents per share: $4,763.3 billion
- Cash per share on balance sheet: $3.89
- PE ratio: 31 (based on three quarter earnings being annualised to full year)
- Dividend yield: 1.51%
Management commentary on the results
“Starbucks delivered strong operating performance in the third quarter, further demonstrating that our ‘Growth at Scale’ agenda is working,” says Kevin Johnson, president and ceo. “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,” concluded Johnson
Starbucks stock price history
The image below shows the stock price history of Starbucks (SBUX) since the start of 2015 and as the image shows it's been a pretty impressive run for Starbucks shares, with it increasing from around $30 a share in January 2015 to close to $100 a share as at the time of writing.
Starbucks stock valuation
So what are Starbucks (SBUX) shares worth and should one be buying the stock now considering the strong increase in its share price since 2015. Do they still offer long term investors value, or should one be looking elsewhere for other stocks offering a greater value proposition? Based on their financial results we value Starbucks (SBUX) shares at $78.50 a share. We therefore believe that Starbucks is overvalued at it's current price and we would not recommend investors buy into SBUX at its current price.