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Starbucks Earnings: What's Wall Street Saying?

Stocks in this article: SBUX

NEW YORK (TheStreet) -- Starbucks (SBUX) reported on Thursday fiscal third-quarter earnings of 67 cents a share -- a penny ahead of consensus estimates. Revenue rose 11.2% to $4.15 billion, as the Seattle-based coffee chain continues to open locations across the world and expand its product offering in stores to include tea, breakfast and lunch foods, and cold beverages.

The company said comparable store sales rose 6% overall -- ahead of consensus estimates -- with 4% of growth coming from more traffic and 2% from higher transactions. U.S. stores specifically experienced a 7% jump in comparable-store sales. Starbucks attributed two percentage points of comp growth to the "strong progress" the company is making in selling food.

Read More: Starbucks Store Makeovers Are Boosting Profit Margins

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However, shares were falling 2% to $78.83 as of 10:30 a.m. on Friday. Investors were not thrilled with management's caution that earnings-per-share growth for fiscal 2015 would come in at the low end of its expected range of 15% to 20% due to fewer coffee commodity cost tailwinds and continued investments. Starbucks said it expected revenue growth of 10% or greater for fiscal 2015; global comparable sales growth in the "mid-single digits;" an additional 1,600 net new stores globally; and EPS growth between 15-20% over fiscal 2014.

Read More: Starbucks Q3 Earnings Live Blog Recap

Here's what Wall Street analysts were saying about the coffee chain's earnings.

Keith Siegner, UBS (Buy; $90 PT)

With a top and bottom line beat in a difficult consumer landscape, F3Q lived up to the lofty expectations which only increased in recent [weeks] up through today's all-time high stock price. We could see temporary pressure on shares following commentary that F15 earnings guidance could be at the lower end of the official +15-20% range behind potential commodity pressure and digital and employee investment. However, against a still-challenging macroeconomic backdrop, we're not phased considering the pressure is largely discretionary investment driven. We would view any weakness as a buying opportunity in this unique multifaceted quality growth story.

Jeffrey Bernstein, Barclays (Equal Weight, $81 PT)

SBUX reported a strong 3QF14, similar to 1HF14. Both top and bottom line were slightly ahead of expectations, an anomaly in the current more-challenging environment. And 4QF14 guidance assumes more of the same. Looking to F15, initial guidance is in line with long-term targets, culminating in 15-20% EPS growth. With that said, growth is expected at the lower end, attributed to the lack of coffee cost favorability along with incremental technology investments. While guidance will likely prove conservative, similar to that seen in F14, with consensus already approaching ~20% there is not much room for error. We see SBUX as a leading global growth story, with an industry-leading U.S. retail coffee platform, significant [international] growth opportunities led by China, and plans to develop [consumer packaged goods] CPG to rival the global retail platform. While bullish on the LT outlook, we believe fairly valued... 25x forward vs. the 20-30x 3-year range and 25x average.

Read More: Why Starbucks' Digital Platform Will Be the Model for Retailers

JPMorgan Chase John Ivankoe (Overweight; $85 PT)

High expectations may limit upside, but strong momentum in the business continues to make Starbucks a long-term holding in our view. On maintained earnings the stock trades at 24.2x C15E EPS, slightly above its average since 2010. FCF yields are very respectable for a growth company, at 2.6% in F14 and 3.2% in F15 with an exceedingly low leverage ratio of essentially flat net debt/F15 EBITDA. While we believe some consolidation may be warranted to more aggressively purchase shares, we continue to advocate long-term investment based on uncommonly high cash flow/balance sheet flexibility, earnings power and visibility over the next few years.

--Written by Laurie Kulikowski in New York.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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