Starbucks (NASDAQ:SBUX) brewed up a venti serving of cheer with its most recent earnings.

Fourth-quarter net income was $150 million, or $0.20 per share, a far cry from the year-ago net income of $5.4 million, or $0.01 per share. Without one-time items, Starbucks' earnings would have been $0.24 per share, beating analysts' estimates for $0.21 per share; Starbucks was able to lower operating costs much more quickly than its sales declined, helping to boost profit.

Unfortunately, that also means Starbucks' sales didn't look quite as impressive. Revenue fell almost 4%, to $2.4 billion; the company noted that it operates fewer U.S. stores now, since the company has been working hard to close underperforming locations. Same-store sales fell 1%, although that figure shows improvement from last quarter's 5% decrease in comps.

The report did have its bright spots. Starbucks increased its earnings guidance, saying it now expects a 15% to 20% growth in adjusted earnings in 2010. And the company is looking for sales growth in the mid- to high single digits. It even plans to open some 100 stores in the U.S. and 200 internationally next year, although they will be primarily licensed stores.

Even with these signs of life, Starbucks still faces abundant challenges. As with many companies these days, cost cuts simply can't continue forever, and customer traffic will still have to improve to get growth back on track. (Of course, the more bullish stance would suggest that if Starbucks is operating more cost-effectively now, it'll be even more profitable once sales do return to more robust levels.)

Still, the java giant faces plenty of competition, from McDonald's (NYSE:MCD) low-priced, gourmet coffee options to the fancy coffee Green Mountain Coffee Roasters (NASDAQ:GMCR) lets folks brew at home. There are other, more direct competitors, too, like Caribou (NASDAQ:CBOU) or Peet's Coffee & Tea (NASDAQ:PEET), which recently announced that it will acquire Diedrich Coffee (NASDAQ:DDRX).

I've been holding on to Starbucks through thick and thin, even as I've increasingly wondered whether its star is starting to tarnish. I'm glad to hear the coffee chain issue more positive news, but it's still got its work cut out for it. With unemployment having just hit a record-breaking 10.2%, Starbucks' high-end coffees may be an even tougher sell to scared consumers.

What do you think? Can Starbucks get back to its more caffeinated past? Let your thoughts percolate in the comments box below.