Starbucks, The Turnaround Has Fully Turned Around (SBUX)

Starbucks Corp. (NASDAQ: SBUX) may have won over some new investors with its dividend announcement last month, but so far it looks to be winning over people with earnings despite a 150% gain from trough to peak in the last bull market cycle.  The company beat earnings and raised guidance, and shares are so far responding.

Its non-GAAP operating margins came in at 17.8%, a considerable improvement from 10.4% a year ago.  The turnaround is working.  Lower store costs, better sales leverage, higher productivity (more work from fewer hands) and closing underperforming stores all contributed.

Starbucks reported $0.29 EPS vs. $0.25 EPS expected; revenues rose over 8% to $2.53 billion vs. $2.41 billion expected. For 2010, it now sees earnings of $1.19 to 1.22 EPS, up from its previous $1.05 to $1.08 range and above the Thomson Reuters $1.12 EPS consensus estimate.

Starbucks closed up 0.5% at $25.39 today, and the 52-week range is $11.20 to $26.00.  We have shares up 1% at $25.66 in the after-hours session.  Valuation may still be a concern going forward, but either way it impossible not to expect analysts to raise their earnings expectations for 2010 and 2011 tomorrow.

JON C. OGG