The King of Coffee Is Set to Report First-Quarter Results

Starbucks is set to report first-quarter results for fiscal 2014. After a record-setting 2013, analysts believe this year will be even brighter.

Jan 22, 2014 at 8:00AM

Over the past year, worldwide coffee giant Starbucks (NASDAQ:SBUX) has reported its four best quarters in the company's history. This has caused the stock to soar to all-time highs and has made it one of the most talked about businesses on Wall Street. The company is set to release first-quarter results shortly, so let's take a look to see if we should be buying now.

The coffee giant
Starbucks is home to the world's largest chain of specialty coffee shops. It currently operates 19,767 locations, with the United States being its largest market. It will exceed 21,000 stores by the conclusion of fiscal 2014 and could easily have more than 25,000 within a few short years.

Screen Shot

Last time out
On Oct. 30, Starbucks released record fourth-quarter results that were mixed compared to analyst estimates. Here's a summary of the report:

EPS $0.63 $0.60
Revenue $3.80 billion $3.81 billion

Source: Starbucks earnings release.

Earnings per share increased 37% and revenue rose 12.8%, driven by global comparable-store sales growth of a strong 7%. Operating income increased 28.7% to $668.9 million as the company's operating margin expanded 220 basis points to 17.6%.These record results caused management to increase its full-year outlook for 2014 and allowed for a 24% increase in its quarterly dividend. Overall, this was a great quarter for Starbucks, and I believe the only reason the quarter was considered "mixed" was because analysts were a bit too bullish.

The expectations
First-quarter results for fiscal 2014 will be released on Jan. 23 before the market opens, and the current expectations call for growth on both the top and bottom lines. Here are the consensus estimates:

EPS  $0.69  $0.57
Revenue $4.29 billion $3.8 billion

These expectations would call for EPS to increase 21.1% and revenue to increase 12.9% year over year. In the fourth-quarter report, management said it expects first-quarter earnings to be in the range of $0.67 to $0.69, right in line with these expectations. I believe these estimates are very attainable and that Starbucks will also report better-than-expected comparable-store sales as well as improvement in its operating margin. This will allow the company to maintain its quarterly dividend and repurchase several million shares throughout the second quarter.

What else to watch for
Other than the key metrics, it will be important to look at the updated store count and expansion plans for the remainder of the year. In the fourth quarter, 558 new stores were opened, bringing the company's total count to 19,767, and management stated plans for 1,500 to be added in 2014. This means Starbucks should surpass the 20,000 mark in the upcoming quarter, a major milestone, but it is more important for the company to say it is on track to meet its goal of 1,500.

Competitor results due out 
Dunkin' Brands (NASDAQ:DNKN), one of Starbucks' largest competitors, is also expected to report strong year-over-year growth when it announces earnings on Jan. 30. Dunkin' Brands is the parent company behind the global powerhouse brands Dunkin' Donuts and Baskin-Robbins. The current analyst estimates look like this:

EPS $0.40 $0.34
Revenue $182.9 million $161.7 million

These estimates would call for earnings growth of 17.65% and revenue growth of 13.1% compared to the same period a year ago. Dunkin' is expanding rapidly throughout the Western United States, which will help drive earnings in the coming years. Dunkin', like Starbucks, is well-positioned to outperform the market in 2014 and will provide additional returns via its 1.6% dividend. Still, I prefer Starbucks at current levels.

The Foolish bottom line
Starbucks was one of the best-performing stocks in 2013, and I believe this trend will continue in 2014. It is expected to report another year of record earnings, and expansion will help drive this growth even higher in the coming years. Keep a close eye on this one and consider buying on any steep decline going into the report, or on any weakness following it.

3 stocks for the long run
As every savvy investor knows, Warren Buffett didn't make billions by betting on half-baked stocks. He isolated his best few ideas, bet big, and rode them to riches, hardly ever selling. You deserve the same. That's why our CEO, legendary investor Tom Gardner, has permitted us to reveal The Motley Fool's 3 Stocks to Own Forever. These picks are free today! Just click here now to uncover the three companies we love. 

Fool contributor Joseph Solitro owns shares of Dunkin' Brands Group. The Motley Fool recommends Starbucks. The Motley Fool owns shares of Starbucks. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information