Starbucks Heats Up

Starbucks is upgraded to buy on expected sales improvement.
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(SBUX) - Get Report

rating was boosted to a buy today, on the expectation that the company's sales are improving.

Jefferies & Co. analyst Jeff Farmer said the coffee retailer has lowered costs more than forecast, which should lift its 2010 profit by 23 cents a share. He also upped his price target to $25 from $22.

In addition, Farmer notes, same-store sales will most likely increase next year due to new prices and some combo deals.

Earlier this month

Starbucks saw fourth-quarter earnings skyrocket

to $150 million, or 20 cents a share, compared with $5.4 million, or 1 cent, in the year-ago period.

And while its same-store sales at the time slipped by 1%, the company said more customers were returning to stores.

Looking ahead, Starbucks expects to see EPS 15% to 20% higher than fiscal 2009 earnings of 80 cents a share.

-- Reported by Jeanine Poggi in New York

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