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Starbucks Perks Up on Broker Action

Starbucks shares jump Tuesday after analysts from Credit Suisse raised their earnings estimates on the coffee chain.

SEATTLE, Wash. (


) --


(SBUX) - Get Starbucks Corporation Report

shares jumped Tuesday morning after analysts from Credit Suisse raised their earnings expectations on the coffee chain.

Credit Suisse analyst Keith Siegner expects Starbucks to earn $1.45 per share in 2011, and $1.69 per share in 2012. The consensus call among Wall Street analysts polled by Thomson Reuters is for earning of $1.43 and $1.63 next year and the year after, respectively.

The analyst raised his estimates based on improved margins and expected earnings-per-share growth in the coming quarters. Siegner maintained his outperform rating and $34 price target on Starbucks shares.

The coffee purveyor's stock jumped 3.9% in the first hour of trading Tuesday, to $27.01, on heavier-than-average volume.

Last month, Starbucks announced it would raise prices on some of its menu offerings to offset rising commodity costs.

The company said the increases would be targeted to "certain beverages in certain markets" in response to the recent jump in the price of green arabica coffee, which it said was close to a 13-year high. It also noted volatility in the cost of other key ingredients, such as sugar, dairy products and cocoa, as a factor in its decision.

The move echoed that of fast-food operator

Wendy's Arby's Group

(WEN) - Get Wendy's Company Report

, which said earlier last month that rising commodity costs would hit its restaurants in the third and fourth quarters of this year. Wendy's expects a 2% to 3% commodity increase for fiscal 2010.

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Higher raw food costs would likely undermine profit margins as fast-food restaurants are hesitant to raise prices in a weak economy, according to Wendy's CFO Stephen E. Hare.

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Starbucks left open the chance that it could make further adjustments to its pricing, saying it would continue to monitor green coffee prices closely and that it "could not rule out the possibility" of lifting the price of its packaged coffee products in the next few months.

In a show of confidence that these moves would be enough to offset the higher ingredient costs, Starbucks reaffirmed its outlook for earnings of $1.36 to $1.41 per share in its fiscal 2011, which ends in September of next year.

-- Written by Miriam Marcus Reimer in New York.

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