Wednesday, October 31, 2012

Starbucks Corporation (NASDAQ:SBUX) All Set To report Q4 Earnings On Thursday

Coffee chain store operator Starbucks Corporation (NASDAQ:SBUX) will be reporting its fourth quarter results on Thursday.

The street expects it to report earnings of $0.45 a share on revenues of $3.39 billion, while for the December quarter guidance has been set at $3.81 billion in revenues.

Starbucks reported Q3 EPS of $0.43 that fell below the consensus of $0.45 per share. Management also lowered its full fiscal 2013 EPS of $2.04-$2.14 due to a deterioration of the macro environment and a broad-based slowdown.

After two years of depressed coffee prices, they are on the uptick once again and Starbucks will gain from that as it locked in its coffee cost in fiscal year 2013 and started to purchase into fiscal year 2014.

Its margins will see improvement from that.

Surveys have shown that Starbucks is gaining market share at the expense of Green Mountain after it introduced its K-Cups about a year ago.

At present the company has nearly 17 percent of the market share, up from 11.2 percent in January, while that of Green Mountain to 57 percent from 59 percent in the same period.

"In my view, Starbucks will continue to gain K-Cups market share at the expense of incumbents and mass-market brands in the long term given its superior coffee quality, strong brand equity, and competitive pricing," Jiang Zhang wrote in Seeking Alpha.

However due to the downturn and lower speeding patterns, consumers are increasingly turning to cheaper alternatives such as Safeway and Kroger, which have introduced their own K-Cups.

Experimentation with different labels by consumers may affect Starbucks in the near term.

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