Why Starbucks (SBUX) Stock Is Up Today

NEW YORK (TheStreet) -- Starbucks (SBUX) is gaining 2.1%to $73.49 Tuesday on news that it will open a La Boulange dinner restaurant in Los Angeles.

According to Bloomberg, the restaurant will carry the brand name of the San Francisco chain La Boulange Bakery. While the bakeries close at 7 p.m., however, the restaurant will serve dinner until 10 p.m. The menu will contain many of the bakery's items include sandwiches, sandwiches, and omelets, and will add other options including croissant burgers, cocktails, beer, and wine.

The restaurant will compete with Starbucks competitors Panera (PNRA), as well as Yum! (YUM), which recently started testing upscale versions of KFC and Taco Bell to take advantage of the "fast-casual" trend.

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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 some important positives, 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 increase in stock price during the past year. 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 6.1%. Since the same quarter one year prior, revenues slightly increased by 9.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the Hotels, Restaurants & Leisure industry average, but is less than that of the S&P 500. The net income increased by 9.4% when compared to the same quarter one year prior, going from $390.30 million to $426.90 million.
  • Net operating cash flow has increased to $418.40 million or 37.09% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -3.56%.
  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
  • STARBUCKS CORP has improved earnings per share by 9.8% 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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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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