Starbucks Earnings: An Early Look

With hundreds of companies having already reported quarterly results, we're now in the heart of earnings season. The key to making smart investment decisions with stocks releasing their quarter reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

Let's turn to Starbucks (NASDAQ: SBUX  ) . The coffee king has recovered nicely from the financial crisis four years ago, crushing any fears that high unemployment and forced austerity might lead to customers giving up their morning java. But the coffee industry has become cutthroat. Let's take an early look at what's been happening with Starbucks over the past quarter and what we're likely to see in its quarterly report on Thursday.

Stats on Starbucks

Analyst EPS Estimate

$0.57

Change from Year-Ago EPS

14%

Revenue Estimate

$3.84 billion

Change from Year-Ago Revenue

11.7%

Earnings Beats in Past 4 Quarters

3

Source: Yahoo! Finance.

Will Starbucks give shareholders a caffeine boost?
Starbucks is one of the few companies for which analysts have actually increased their earnings estimates over the past few months. The penny-per-share increase isn't all that big, but with analysts generally reining in estimates on most companies, it's still noteworthy. The stock has also done nicely, rising about 16% since mid-October.

Starbucks has become so successful because it's part of millions of customers' daily routines. Selling what many people see as a necessity, Starbucks has demonstrated its ability to survive poor economic times and prosper.

But as huge as Starbucks is, it hasn't stopped trying to innovate and expand. The company's recent completion of its buyout of Teavana Holdings is just the latest in a series of acquisitions designed to help broaden the coffee giant's appeal and increase its penetration in hot consumer markets. Equally important has been the company's move into emerging markets, with a strong reception so far in China and with huge potential for broader expansion there before it even comes close to saturation.

Inevitably, investors will focus on Starbucks' Verismo single-serve coffeemaker to see how well it's doing against rival Green Mountain Coffee Roasters  (NASDAQ: GMCR  ) and its well-established Keurig line. But overestimating the importance of Verismo is a mistake, because the whole draw of Starbucks for many is the store experience -- something that's lost with a home-brewer. What's more important is how it does compared to other store-based chains, and with McDonald's (NYSE: MCD  ) having shown its vulnerability in its recent monthly same-store sales decline back in October, Starbucks has room to get aggressive to try to win back market share.

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