NEW YORK (TheStreet) -- Shares of Starbucks Corp. (SBUX) are slightly higher in pre-market trade after it was reported that the coffee shop chain agreed to buy the remaining 61% of its Japanese operations for about $913.5 million, Bloomberg reports.
The deal will include buying a 40% stake from Sazaby League for about $505 million and the 21% owned by public shareholders for about $408.5 million, the company said in a statement.
Starbucks, which gets over 6% of revenue from its Asia unit, recently acquired the Teavana tea company and Bay Bread bakery to help attract customers with non-coffee items, Bloomberg noted. In Japan, ready-to-drink beverages are profitable and selling well, presenting a strong opportunity for Starbucks, CFO Scott Maw said at an investor conference in June.
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, growth in earnings per share and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 5.5%. Since the same quarter one year prior, revenues rose by 11.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Hotels, Restaurants & Leisure industry. The net income increased by 22.7% when compared to the same quarter one year prior, going from $417.80 million to $512.70 million.
- Net operating cash flow has increased to $850.10 million or 27.77% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -5.08%.
- The current debt-to-equity ratio, 0.40, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that SBUX's debt-to-equity ratio is low, the quick ratio, which is currently 0.62, displays a potential problem in covering short-term cash needs.
- STARBUCKS CORP has improved earnings per share by 21.8% 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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