How Will Starbucks (SBUX) Stock Be Affected By New Price Increases?

NEW YORK (TheStreet) -- Shares of Starbucks Corp.  (SBUX) are down -0.92% to $76.52 on heavy trading volume after it was reported that the company will raise prices for certain packaged coffee and other products, responding to a spike in raw coffee costs earlier this year that is now making its way to consumers, the Wall Street Journal reports.

Starting Tuesday, some beverages in Starbucks company-operated stores will increase by five cents to 20 cents. Price increases on the beverages in its stores will increase the average ticket by less than 1%, Starbucks said.

The list prices of Starbucks packaged coffee sold in grocery stores will increase by an average of 8% on July 21, the Journal noted.

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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 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 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 6.0%. 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 -3.08%.
  • 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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