Can Starbucks Break Out?

E = Earnings Are Increasing Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Starbucks’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Starbucks look like and more importantly, how did the markets like these numbers?

2012 Q4

2012 Q3

2012 Q2

2012 Q1

Earnings Growth (Y-O-Y)

14%

-2.13%

19.44%

17.65%

Revenue Growth (Y-O-Y)

10.59%

10.95%

12.69%

14.72%

Earnings Reaction

4.1%

9.05%

-9.4%

-5.32%

Starbucks has generally seen increasing earnings and revenue over the last four quarters. From these figures, the markets have been very pleased with Starbucks’s last two earnings announcements.

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P = Poor Relative Performance Versus Peers and Sector

How has Starbucks stock done relative to its peers, Dunkin Brands (NASDAQ:DNKN), McDonald’s (NYSE:MCD), Green Mountain Coffee Roasters (NASDAQ:GMCR), and sector?

Starbucks

Dunkin Brands

McDonald’s

Green Mountain Coffee Roasters

Sector

Year-to-Date Return

5.58%

17.9%

12.82%

32.10%

10.84%

Starbucks has been a relative underperformer year-to-date.

Conclusion

Starbucks provides products that have received a heavy rise in demand, around the world, over the last few years. The demand for its products has consistently increased earnings and revenue which has led investors to bid the stock near all-time high prices. However, Starbucks has been underperforming its strong peers and sector. Look for Starbucks stock to OUTPERFORM.

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