RBC Capital Reiterates Bullish View on Starbucks (SBUX)

RBC Capital analyst David Palmer reiterated an Outperform rating and $50 price target on Starbucks (NASDAQ: SBUX), saying the stock is deserving of a premium multiple.

The firm is also reiterating their split-adjusted FY15 and FY16 EPS estimates of $1.57 (+18% YOY) and $1.84 (+18% YOY), respectively. "Our FY15 EPS estimate is at the high end of the company's $1.55-$1.57 guidance range, and assumes slightly higher EPS growth during 2H/15," Palmer notes. "We believe favorable dairy prices and supply chain efficiencies will continue to provide a boost to EPS this year, while falling Arabica coffee prices are likely providing a window of opportunity for the company to lock in its needs for FY16. Our $50 price target equates to ~26x our CY16 EPS estimate."

The firm is also maintaining F2Q EPS and Americas same store sales (SSS) growth estimates of $0.33 (+17% YOY; cons. $0.33) and 5%, based on results of our proprietary consumer panel analysis through March.

In addition, the analyst said channel development share gains continue. "Our analysis of measured channel data suggests that Starbucks has continued to gain share of both packaged coffee and single serve," the analyst commented. "In the most recent 12-week period, Starbucks' share of packaged coffee and K-Cups increased to 10.9% and 15.9% from 10.4% and 13.7% last year, respectively."

"We believe Starbucks can continue to generate industry-leading SSS growth and accelerate development, which together with productivity should deliver mid-teens EPS growth over the next several years. And based on the initiatives outlined by the company, we believe $3.00 EPS is possible over the next five years, representing ~18% CAGR. Starbucks remains one of a shrinking group of consumer large cap growth stories. At ~1.4x P/E to growth, we believe Starbucks represents growth at a reasonable price."

For an analyst ratings summary and ratings history on Starbucks click here. For more ratings news on Starbucks click here.

Shares of Starbucks closed at $48.17 yesterday.

You May Also Be Interested In

• ABB LTD (ABBN:SW) (ABB) PT Raised to CHF45 at RBC Capital
• Equifax (EFX) PT Lowered to $265 at Stifel
• Elevance (ELV) PT Raised to $575 at RBC Capital