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Will Starbucks (SBUX) Stock Be Helped By New Express-Style Stores?

Stocks in this article: SBUX

NEW YORK (TheStreet) -- Starbucks Corp.  (SBUX)   plans to cater to busy commuters by launching smaller, express-style stores, the Wall Street Journal reports.

The new stores will have reduced beverage and food menus and will integrate the company's digital payment and mobile ordering systems to speed up service, the company said.

The coffeehouse chain is looking to capitalize on the strength of its drive-through stores, which make up about 40% of its U.S. company-operated stores and have higher sales growth than stores without drive-through service, the company said.

Must Read: Warren Buffett's 25 Favorite Stocks

 

Starbucks also said it plans to open at least 100 new stores in the next five years dedicated to its Starbucks Reserve small-batch arabica coffee line, according to the Journal.

Shares of Starbucks are slightly lower in pre-market trade..

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 a number of strengths, 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, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures 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 5.5%. Since the same quarter one year prior, revenues rose by 11.2%. 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 S&P 500 and the Hotels, Restaurants & Leisure industry. The net income increased by 22.7% when compared to the same quarter one year prior, going from $417.80 million to $512.70 million.
  • Net operating cash flow has increased to $850.10 million or 27.77% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -5.13%.
  • The current debt-to-equity ratio, 0.40, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that SBUX's debt-to-equity ratio is low, the quick ratio, which is currently 0.62, displays a potential problem in covering short-term cash needs.
  • STARBUCKS CORP has improved earnings per share by 21.8% 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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