Thursday, November 5, 2009

Starbucks tops earnings estimates....and they needed to (SBUX)

Starbucks (SBUX) reported earnings per share of 24cents after the close of trading today, ahead of the 21cents expected by Wall Street. Revenues were in line with estimates.

The company increased full year 2009 earnings guidance to 80cents, just head of the 76cents currently anticipated.

With a rich 21 Price-to-Earnings ratio and a 150% move off the March lows, SBUX needed to outperform in order to maintain its price gains.

Notables, from the release:

-->>Operating margin improved 760 basis points to 8.2% (hmmm, it rose 7.6% to hit 8.2%, not much of a starting point!)
-->>Cost savings initiatives delivered full-year savings of approximately $580 million, exceeding target by $30 million.
-->>Operating cash flow totaled $1.4 billion and free cash flow exceeded $900 million.

Per the guidance below, they expect Free Cash Flow of $900 million in 2010 -->> that's a Free Cash Flow Yield of 6.4% based on the current market value of the company, and I think that makes shares fully priced.

And on a related note, a fantastic Family Guy Starbucks clip:

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