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Category: Stock Market and Starbucks
Date: 30 November 2019 Stock Price: $85.40 We take a look at the 4th quarter 2019 earnings report of Starbucks, one of the world's best known coffee shop franchises.
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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
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.
Brand Portfolio
Starbucks Coffee, Seattle’s Best Coffee, Teavana, Evolution Fresh, Ethos Water and Torrefazione Italia Coffee.
Investor Information
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.
Overview of Starbucks 4th quarter 2019 earnings report
The numbers below refers to the latest quarter unless specified otherwise:
- Net revenues: $6.747 billion (up from $6.303 for the same quarter of the previous year)
- Net revenues increased by 7% over the last 12 months
- Net revenues increased by 7% over the last 12 months
- Total operating expenses: $5.755 billion (up from $5.437 billion for the same quarter of the previous year)
- Total operating expenses increased by 5.9% over the last 12 months
- Total operating expenses increased by 5.9% over the last 12 months
- Net earnings: $802.9 million (up from $55.8 million for the same quarter of the previous year)
- Net earnings increased by 6.2% over the last 12 months
- Net earnings increased by 6.2% over the last 12 months
- Diluted earnings per share: $0.67 (up 19.6% from $0.56 for the same quarter of the previous year)
- PE ratio of Starbucks: 29.1
- PE ratio of Starbucks: 29.1
- Dividend per share for the quarter: $0.41 (up from $0.36 for the same quarter of the previous year)
- Dividend yield of Starbucks: 1.9%
- Diluted number of shares in issue: 1.233 billion
- Cash and cash equivalents: $2.686 billion
- Cash and cash equivalents per share: $2.17
- Cash and cash equivalents makes up 2.5% of Starbucks' market capital
- Cash and cash equivalents makes up 13.9% of Starbucks' total assets
- Inventories: $1.529 billion
- Inventories makes up % of Starbucks' total assets
- Cash generated from operations from for full fiscal year: $5.047 billion
- Cash generated from operations for full fiscal year per share: $4.09
Starbucks' management commentary on the ir 4th quarter 2019 earnings report
SEATTLE--(BUSINESS WIRE)-- Starbucks Corporation (NASDAQ: SBUX) today reported financial results for its 13-week fiscal fourth quarter and 52-week fiscal year ended September 29, 2019. GAAP results in fiscal 2019 and fiscal 2018 include items which are excluded from non-GAAP results. Please refer to the reconciliation of GAAP measures to non-GAAP measures at the end of this release for more information.
“I’m very pleased with our strong finish to fiscal 2019, as we sustained positive momentum across each of our business segments,” said Kevin Johnson, president and ceo. “Our U.S. business delivered 6% comparable store sales growth in the fourth quarter, while China grew comparable store sales by 5% and total transactions by 13%. Our strong performance throughout fiscal 2019 gives us confidence in a robust operating outlook for fiscal 2020.”
“We are making meaningful progress against our strategic priorities while streamlining the company, bringing more focus and discipline to everything we do. The investments we are making for the long term---in our partners, our stores, beverage innovation and digital---are collectively delivering an elevated Starbucks Experience, as evidenced by all-time-high customer connection scores in the fourth quarter. This long-term focus is instrumental to how we are building an enduring company,” concluded Johnson.
“I’m very pleased with our strong finish to fiscal 2019, as we sustained positive momentum across each of our business segments,” said Kevin Johnson, president and ceo. “Our U.S. business delivered 6% comparable store sales growth in the fourth quarter, while China grew comparable store sales by 5% and total transactions by 13%. Our strong performance throughout fiscal 2019 gives us confidence in a robust operating outlook for fiscal 2020.”
“We are making meaningful progress against our strategic priorities while streamlining the company, bringing more focus and discipline to everything we do. The investments we are making for the long term---in our partners, our stores, beverage innovation and digital---are collectively delivering an elevated Starbucks Experience, as evidenced by all-time-high customer connection scores in the fourth quarter. This long-term focus is instrumental to how we are building an enduring company,” concluded Johnson.
Fiscal 2020 Guidance
The company introduces the following fiscal year 2020 guidance (all growth targets are relative to fiscal year 2019 non-GAAP measures unless specified):
The company introduces the following fiscal year 2020 guidance (all growth targets are relative to fiscal year 2019 non-GAAP measures unless specified):
- Global comparable store sales growth of 3% to 4%
- Approximately 2,000 net new Starbucks stores globally
- Americas approximately 600 net new stores (3% to 4% growth in the U.S.)
- International approximately 1,400 net new stores (mid-teens growth in China)
- Consolidated GAAP revenue growth of 6% to 8%
- Consolidated operating income growth of 8% to 10%
- Consolidated operating margin improving modestly
- GAAP interest expense of approximately $415 to $425 million
- GAAP and non-GAAP effective tax rate in the range of 22% to 24%
- GAAP EPS in the range of $2.84 to $2.89
- Non-GAAP EPS in the range of $3.00 to $3.05
- Capital expenditures of approximately $1.8 billion
Starbucks (NASDAQ: SBUX) stock price history
The image below shows the stock price history of Starbucks (SBUX) over the last 5 years. And its been a very good time for Starbucks (SBUX) stockholders over the last 5 years. 5 years ago the stock of Starbucks was trading at $41.80 and its currently trading at $85.0. That's a return of 104.4% provided to Starbucks stockholders over the last 5 years.
The stock of Starbucks is trading at a lot closer to its 52 week high of $99.72 than it is to 52 week low of $60.42, which to us is a clear indication that the short term sentiment and momentum of Starbucks stock is positive.
The stock of Starbucks is trading at a lot closer to its 52 week high of $99.72 than it is to 52 week low of $60.42, which to us is a clear indication that the short term sentiment and momentum of Starbucks stock is positive.
Recent coverage of Starbucks
The extract below covers the latest regarding Starbucks as obtained from Seeking Alpha
Summary
After more than doubling from 2018 lows, Starbucks (NASDAQ:SBUX) has undergone extended profit taking in the past three months. From its highs in late July, the stock has corrected by almost 19% following indications 2020 growth rates may slow. Had the company not reported relatively strong fourth quarter 2019 results a couple of weeks ago, investors could have faced further downside as several key technical indicators have already turned bearish. While Starbucks' Q4 earnings may stabilize the stock in the near term above a critical longer-term technical support level, tougher comparisons will require the company to execute almost flawlessly just to match already lowered expectations.
Fourth Quarter And Fiscal 2019 Earnings
In the past two quarters, Starbucks has executed extremely well in their Americas market segment. In the third and fourth quarter, the company reported Americas segment same store sales growth of 7% and 6% respectively. More importantly, transactions were up 3% in each quarter reversing a negative traffic trend during the past three years
Read the full article here
Summary
- Starbucks' Q4 2019 earnings were positive enough to help its stock hold key longer trend technical support levels.
- Starbucks benefitted from easy comparisons in the past two quarters which will reverse in the next several quarters.
- Operating headwinds will likely slow 2020 earnings growth and put pressure on the stock which is trading at four times growth rates.
After more than doubling from 2018 lows, Starbucks (NASDAQ:SBUX) has undergone extended profit taking in the past three months. From its highs in late July, the stock has corrected by almost 19% following indications 2020 growth rates may slow. Had the company not reported relatively strong fourth quarter 2019 results a couple of weeks ago, investors could have faced further downside as several key technical indicators have already turned bearish. While Starbucks' Q4 earnings may stabilize the stock in the near term above a critical longer-term technical support level, tougher comparisons will require the company to execute almost flawlessly just to match already lowered expectations.
Fourth Quarter And Fiscal 2019 Earnings
In the past two quarters, Starbucks has executed extremely well in their Americas market segment. In the third and fourth quarter, the company reported Americas segment same store sales growth of 7% and 6% respectively. More importantly, transactions were up 3% in each quarter reversing a negative traffic trend during the past three years
Read the full article here
Starbucks latest stock valuation
So based on Starbucks (SBUX) latest earnings report ad their fiscal guidance what do we value the stock of Starbucks at? Based on their earnings report and guidance provided our valuation model provides a target (full value price) for Starbucks (SBUX) at $76.60 a stock (down slightly from our 3rd quarter 2019 earnings report valuation). We therefore believe the stock of Starbucks is overvalued
We recommend that long term fundamental and value investors look to enter a stock at least 10% below our target (full value) price which in this case is $76.60. A good entry point into Starbucks would therefore be at $69 or below.
We expect the stock of Starbucks to pull back from current levels to levels closer to our target (full value) price in coming weeks and months.
We recommend that long term fundamental and value investors look to enter a stock at least 10% below our target (full value) price which in this case is $76.60. A good entry point into Starbucks would therefore be at $69 or below.
We expect the stock of Starbucks to pull back from current levels to levels closer to our target (full value) price in coming weeks and months.
Next earning release of Starbucks
It is expected that Starbucks will release their 1st quarter 2020 earnings report towards the end of January 2020