Why Starbucks Continues Impressing Investors

Starbucks Corp. (NASDAQ: SBUX | SBUX Price Prediction) reported fiscal fourth-quarter and full-year 2019 results after markets closed Wednesday. For the quarter, the coffee roasting and restaurant company posted adjusted diluted earnings per share (EPS) of $0.70 on revenues of $6.75 billion. In the same period a year ago, the company reported EPS of $0.625 on revenues of $6.3 billion. Fourth-quarter results also compare to consensus estimates for EPS of $0.70 and $6.68 billion in revenues.

For its full fiscal year, Starbucks reported EPS of $2.83 and revenues of $26.5 compared with year-ago EPS of $2.42 and revenues of $24.72 billion. Analysts had estimated EPS of $2.82 and revenues of $26.44 billion.

Americas segment same-store sales rose 6% and U.S. average ticket and number of transactions both rose 3%. International same-store sales rose 3%.

Americas revenues rose 9% to $4.65 billion, operating income rose 5% to $938.9 million, and operating margin totaled 20.2%, down 70 basis points. In the International segment, revenues rose 6% to $1.57 billion primarily driven by 1,337 net new store openings. Operating income totaled $262.7 million and operating margin rang in at 16.7%, up 180 basis points.

CEO and President Kevin Johnson commented:

I’m very pleased with our strong finish to fiscal 2019, as we sustained positive momentum across each of our business segments. Our U.S. business delivered 6% comparable store sales growth in the fourth quarter, while China grew comparable store sales by 5% and total transactions by 13%. Our strong performance throughout fiscal 2019 gives us confidence in a robust operating outlook for fiscal 2020.

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For the new 2020 fiscal year, Starbucks guided same-store sale growth of 3% to 4% relative to 2019 results. The company plans to open about 2,000 new stores worldwide, including 600 net new stores in the Americas. GAAP revenue growth is forecast at 6% to 8% year over year and adjusted EPS is targeted at $3.00 to $3.05. Capital spending is expected to reach $1.8 billion.

Starbucks repurchased 23.5 million shares of stock in the fourth quarter and approximately 29.2 million remain authorized under its current repurchase program.

The company boosted its quarterly dividend from $0.36 to $0.41, payable on November 29 to shareholders of record on November 13. The dividend yield at the old rate was 1.72%.

The stock added more than 3% in after-hours trading Wednesday to trade at $86.72 in a 52-week range of $58.07 to $99.72. The consensus 12-month price target was $95.74 before results were announced.
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