Analysts Weigh In On Starbucks (SBUX) Following Better-Than-Expected Results

After the close, coffee-chain Starbucks (Nasdaq: SBUX) surprised Wall Street with a better-than-expected quarter and guidance. Shares are seeing a 15% upswing following the news.

Starbucks reported Q3 EPS of $0.24, 5 cents better than the analyst estimate of $0.19. Revenue for the quarter was $2.4 billion, versus the consensus of $2.38 billion. Starbucks said it sees FY09 non-GAAP EPS $0.74-$0.75 versus consensus of $0.70. Starbucks also said comp sales were down only 5% in the quarter, which is a sequential improvement from an 8% decline from Q2. Today, a number of analyst are weighing in on the stock. Here is what some of them have to say:

Deutsche Bank "We are upgrading SBUX to Hold based primarily on materially better cost management and potential bottoming of weak top-line trends. We continue to regard the competitive threat from MCD as onerous, and the core positioning in "affordable luxuries" as vulnerable. However financial discipline and ability to stabilize earnings have been better than expected, value initiatives have improved, and historical focus on store-led growth is gone...Flowing through higher cost savings, we raise our 4Q09 estimate from $0.17 to $0.19 and FY10 from $0.76 to $0.85. Our estimates are no longer below guidance, although we continue to believe there is vulnerability to competitive pressure." Upgrades from Sell to Hold and raises price target from $9 to $14.

Goldman Sachs We expect SBUX shares to trade up sharply tomorrow. Cost saves are coming in more quickly and with a greater magnitude than expected (now targeting $550 mn, up $50 mn), and sales have improved sequentially. This should spark investor enthusiasm despite management’s caution. The FY10 target of $0.84-$0.89 seems conservative (likely on top line); we are at $0.95. Reit Neutral, raises price target from $13 to $17.

Piper Jaffray Cost cutting measures in the 3Q09 totaled $175 million (versus $150 million goal); accounting for at least $0.02 per share upside... However, cost cuts suggest not only rationalization of the current portfolio, but limited plans for unit growth going forward (i.e. G&A at 4.6% of sales as of 3Q09 end)... The balance sheet is in an improved condition; with a projected $500 million FCF at year end we calculate an approximate 5% yield... Beyond current results, our research suggests a more traditional franchise model may best facilitate long-term growth, which would in effect double the company's earnings power. Reit Neutral, $13 price target.

Some Other Changes:
RBC Capital - Reit Sector Perform, raises price target from $13 to $16
JP Morgan - Reit Overweight, raises price target from $15 to $17
Jefferies - Reit Hold, raises price target from $14 to $16
Barclays - Reit Equal Weight, raises price target from $11 to $15.

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