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TheStreet Open House

Why Starbucks (SBUX) Stock Is Up in After-Hours Trading Today

NEW YORK (TheStreet) -- Starbucks  (SBUX) ticked upward 1% in after-hours trading on Thursday after the company reported second-quarter results that included better-than-expected comparable-store sales growth.

The coffee giant noted worldwide comparable-store sales rose 6%, which beat the 5.4% consensus estimate from analysts polled by Thomson Reuters

Profit was $427 million, or 56 cents a share, up from $390.4 million, or 51 cents a share, in the same period one year earlier. Starbucks said in January it expected earnings per share of 54 cents to 55 cents, which was slightly less than analysts' estimates at that time.

Net revenue for the quarter increased to $3.87 billion, versus the consensus estimate of $3.95 billion.

Starbucks also increased its earnings outlook for the full year to a range of $2.62 to $2.68 on revenue growth of at least 10%. The company had previously increased its earnings outlook in January to a range of $2.59 to $2.67 and reiterated its outlook for at least 10% revenue growth and worldwide comparable-store sales growth in the mid-single digits.

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Separately, TheStreet Ratings team rates STARBUCKS CORP as a "buy" with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate STARBUCKS CORP (SBUX) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income, largely solid financial position with reasonable debt levels by most measures, solid stock price performance and growth in earnings per share. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 3.8%. Since the same quarter one year prior, revenues rose by 11.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the Hotels, Restaurants & Leisure industry average, but is less than that of the S&P 500. The net income increased by 25.1% when compared to the same quarter one year prior, rising from $432.20 million to $540.70 million.
  • The current debt-to-equity ratio, 0.42, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.78 is somewhat weak and could be cause for future problems.
  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • STARBUCKS CORP has improved earnings per share by 24.6% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, STARBUCKS CORP swung to a loss, reporting -$0.01 versus $1.79 in the prior year. This year, the market expects an improvement in earnings ($2.67 versus -$0.01).
  • You can view the full analysis from the report here: SBUX Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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