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3 Coffee Stocks Brewing Up a Comeback

Caribou Coffee sells whole beans, ground coffee and single-cup coffee to grocery stores in addition to operating its namesake coffee houses. Barish also raised his target price for Caribou, to $24; the stock is currently trading around $17. He believes the earnings per share could grow 47% year over year. The company has guided to a net sales growth of 10-12% and now believes it will be closer to the bottom of that range -- which caused the stock to pull back.

Caribou isn't the big behemoth that Starbucks is, which makes it a medium roast. It has experienced some insider selling, and that has spooked investors. Caribou, though, is positioning itself as a socially responsible company and highlighting its food options as more healthy. If the company successfully sells itself as a higher moral choice than Starbucks, it will be able to draw clientele that want to "feel good" about their coffee purchases.

Sara Lee is the riskier coffee choice -- making it the dark roast of the stock selections. The company will be splitting into two parts this summer, spinning off its international coffee and tea brands under the name D.E. Master Blenders 1753.

Sara Lee is home to Maryland Club coffee, as well as international names like Senseo and Douwe Egberts. Barish believes the international coffee and tea business is a very strong portfolio. He writes, "It has more than 30% of sales in emerging markets. It has the potential to get back up to 17%, 18% operating margins, which was the typical level for coffee before coffee bean prices surged about 18 months ago."

--Written by Debra Borchardt in New York.

>To contact the writer of this article, click here: Debra Borchardt.

>To follow the writer on Twitter, go to http://twitter.com/wallandbroad.
Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.
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