Some Key Takeaways From Starbucks' Latest Report

After Starbucks (NASDAQ: SBUX  ) reported solid earnings results last Thursday, the recent slide in the company's shares was halted, which is especially impressive considering the overall rout in the general indices last week. Starbucks management offered clear guidance for fiscal 2014 and highlighted some key growth drivers for the future.

Solid earnings report
In the face of a rapidly declining share price and plunging market, Starbucks delivered just what the doctor ordered: a relatively solid earnings report. The company announced record first-quarter results last week, including a record $4.2 billion in quarterly revenue and earnings per share of $0.71.

On a year-over-year basis, revenue for the first quarter of fiscal 2014 grew to $4.2 billion, up 11.8% from fiscal 2013's ~$3.8 billion. Diluted earnings per share increased to $0.71, up 24.5% from fiscal 2013 $0.57.

Although Starbucks' Q1 revenue fell slightly short of the average analyst estimate, which called for ~$4.3 billion, the company did manage to exceed the consensus analyst EPS estimate, which called for diluted earnings of $0.69.

Solid growth
Shares of Starbucks were volatile in the initial after-hours trading session, and this was clearly due, at least in part, to management's forward-looking guidance.

Although disappointing to some investors, Starbucks' overall growth projections remain very solid. The company expects revenue growth in 2014 of 10% or greater, with same-store sales growth in the mid-single digits. Starbucks management also expects a 150-200 basis point improvement in the consolidated operating margin in 2014 over the previous year.

To help drive revenue growth, Starbucks is targeting a total count of approximately 1,500 new store openings in 2014; roughly 600 in the company's 'Americas' region, another 150 in the EMEA (Europe middle East Africa) region, and a staggering 750 in the CAP (China/Asia Pacific) region. 

Progress on this front is already well under way in fiscal 2014 and should provide confidence to investors that management's projections are achievable. Starbucks opened 209 new stores in the CAP region in the first quarter alone. Revenue for the segment grew an impressive 25% year over year. Additionally, growth in the company's CAP segment is not simply from new store openings. In China/Asia Pacific, in which Starbucks already has a presence in 14 countries, comparable-sales growth was a healthy 8%. Starbucks Chairman, President, and CEO Howard Schultz nonchalantly reminded investors, "These are best-in-class results for any retail or restaurant operating at our scale in Asia."

Disappointing earnings guidance?
However, the company did provide second- and third-quarter EPS guidance for fiscal 2014 that was slightly lower than most estimates. For the second quarter, management expects EPS to be in a range of $0.54-$0.55, and for the third quarter it expects EPS to be in a range of $0.64-$0.66.

The company also projected full-year EPS to be in a range of $2.59-$2.67. On average, analysts are expecting $2.66, meaning Starbucks would have to come in at the very top of its range to exceed the consensus estimate.

Better than the competition
While Starbucks certainly did not blow out the average analyst estimates, the company proved yet again that it is still growing at solid rates, much better than smaller competitors in fact. Here is how the coffee giant's revenue and earnings projections compare to those of Dunkin' Brands Group (NASDAQ: DNKN  ) and Green Mountain Coffee Roasters (NASDAQ: GMCR  ) :


Dunkin' Brands

Green Mountain


Revenue Growth




EPS Growth




Despite being almost five times the size of Green Mountain and more than 10 times the size of Dunkin' Brands, Starbucks is still projected to grow sales at the fastest rate in 2014. Additionally, although it is extremely close, the revised analyst estimates now call for Starbucks to lead both listed competitors in terms of 2014 EPS growth as well.

Why you should invest
Why should investors bother investing in any other coffee company in the world other than Starbucks? My answer is, they shouldn't. Starbucks remains one of the fastest-growing companies in the entire beverage/restaurant industry, which is impressive considering its already massive size and global footprint.

However, the company also boasts one of the strongest brands around, one that is recognized by consumers the world over. As such, Starbucks remains one of my top growth picks in the beverage/restaurant industry for 2014 and beyond.

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Philip Saglimbeni

Philip is an avid investor and writer. He contributes to The Motley Fool and Seeking Alpha. You can follow Philip on Twitter @philsags.

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