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If the Starbucks/Kraft Deal Is So Big, Why Are Analysts Doing So Little?

From the old news, new spin department:

Earlier this week, the stock of


(SBUX) - Get Starbucks Corporation Report

percolated 14% after the company announced it had struck a deal with


, a unit of

Philip Morris

(MO) - Get Altria Group Inc Report

, to distribute its stock to grocery stores. After making the announcement, the company held a meeting with analysts in Seattle. What's remarkable is that despite the hype surrounding the deal, not one analyst raised earnings estimates.

"In the short term, there's no incremental impact on earnings," says analyst John Rogers of

D.A. Davidson

in Portland, the only analyst who currently rates the stock a hold. "They have to wait and see how successful it is and how Kraft and Starbucks will work together."

To be sure, there are costs involved in hiring a middleman, and Kraft isn't distributing the coffee out of the goodness of its heart. Starbucks insists the deal won't put any pressure on margins, but hasn't disclosed details of the Kraft deal. Then there's the issue of cannibalization: By selling its coffee in supermarkets, won't Starbucks risk cannibalizing bean sales in its own stores, whose growth already has appeared to have stalled? Based on tests in Portland and Chicago and a recent rollout in 10 western states, Starbucks doesn't think so. In fact, under interrogation by Mark Haines on

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, Starbucks CEO Howard Schultz said he believed that sales in grocery stores will actually drive consumers to his establishments.

Perhaps, but the only certainty is that Starbucks is sure to increase the volume of the coffee it sells in the grocery store, where margins are razor thin and shelf space doesn't come cheap. Without knowing details of the deal, it's hard to say how and when Starbucks will benefit.

"This is a great company," Rogers says. "They've done an unbelievable job growing the business. The question comes down to valuation." At 42 times this year's expected earnings -- with its core business clearly maturing -- the answer may not be what investors want to hear. On Wednesday, Starbucks lost 1 1/2, or about 4%, to 36 3/16 in a broad market selloff.

Short Position

For the past 10-plus years, my column has lumped all shorter items at the bottom under the heading "Short Positions." It should go without saying that the use of the phrase "short positions" is a heading (my meek attempt at a play on words) for items that are brief. It is not a recommendation to short the stocks of companies listed under that heading. While this column does, at times, quote money managers and analysts who recommend buying or shorting stocks, this column does not make outright recommendations to do anything other than to do your homework and


to buy or sell stocks exclusively based on what you read here.

Herb Greenberg writes daily for

. In keeping with the editorial policy of


, he does not own or short individual stocks. He also does not invest in hedge funds or any other private investment partnership. He welcomes your feedback at Greenberg also writes the monthly "Against the Grain" column for