Starbucks Raises Guidance

November 5, 2009

stock ratings

Stock	Grade
DDRX Diedrich Coffee Inc.
GMCR Green Mountain Coffee Roasters Inc.
PEET Peet's Coffee & Tea Inc.
SBUX Starbucks Corp.

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Starbucks (SBUX) continues to do well with its business restructuring. The company had run into a lot of trouble. For five straight quarters, Starbucks experienced declining year-over-year earnings, which was unthinkable just a few years ago. They over-expanded and soon found their business suffering. Starbucks has cut costs by $580 million this year and they've shuttered around 900 stores. The new strategy seems to be working.

The coffee-shop outfit just reported earnings of 24 cents a share which was three cents more than estimates. Even better news is that the company raised guidance for next year. Earlier they had said to expect EPS growth of 13% to 18%. Now they say it will be 20% which translates to full-year 2010 EPS of 96 cents. Going by today's close, that's 20.5 times forward earnings (the shares are up some after-hours). This is very good news and I rate Starbucks a Buy.

In the coffee sector, we're still celebrating Peet's (PEET) buyout offer for Deidrich Coffee (DDRX). Next week, we can look forward to earnings from Green Mountain Coffee (GMCR).

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