Starbucks Corp - Growth & Income

Coffee prices have been soaring lately, but that hasn’t stopped Starbucks Corp (SBUX) from delivering another excellent quarter. The company recently reported solid fourth quarter results for fiscal year 2010 driven by strong top-line growth both domestically and abroad.

Management is also optimistic that it can grow EPS next year by about 15% in spite of higher commodity costs. In addition, the company has been producing strong free cash flow and paid its first dividend in 2010.

Solid Quarter

On November 4 Starbucks reported its results for the fiscal fourth quarter of 2010. Earnings per share came in at $0.37, beating the Zacks Consensus Estimate by 5 cents. It was a 54% increase over the same quarter last year.

Total net revenues grew 9% over the same quarter in 2009, including 7% growth in the U.S. Sales were up approximately 12% internationally.

Meanwhile, the operating margin improved from 10.4% in the fourth quarter of 2009 to 14.3% as higher commodity costs were more than offset by increased sales leverage.

Outlook

Despite higher coffee costs and a fragile economic recovery, management is cautiously optimistic for 2011. The company expects mid to high single-digit revenue growth on low to mid single-digit same-store sales growth.

Management expects to earn between $1.41 and $1.47 per share, which includes an unfavorable impact of $0.08 to $0.10 per share due to higher commodity costs.

The Zacks Consensus Estimate is slightly above this range at $1.48. This equates to 16% earnings per share over 2010. The 2012 estimate is currently $1.71, representing 15% annual EPS growth.

Estimates have been climbing for the last several months, as seen in the company’s Price & Consensus chart:

SBUX: Starbucks Corp