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Starbucks’ 4Q15 Earnings: Impressive Momentum Continues

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Starbucks earnings

The Seattle-based coffee giant Starbucks (SBUX) reported its 4Q15 earnings on October 29, 2015, after the market closed. The company reported an earnings per share, or EPS, of $0.43, which missed analysts’ consensus estimate of $0.44, delivering a negative earnings surprise. Shares were trading lower the day after, closing at $62.80 from $63.10. YTD (year-to-date) Starbucks has returned 53%. Compare this to the Consumer Discretionary Select Sector SPDR ETF (XLY), which returned 11.8% YTD. Dunkin’ Brands (DNKN) has returned -4.5%, Yum! Brands (YUM) has returned -3.2%, and McDonald’s (MCD) has returned 19.1% YTD.

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4Q15 results

  • Starbucks’ EPS of $0.43 for 4Q15 translates into an earnings growth rate of 16% YoY (year-over-year).
  • Historically, over the past 11 quarters, Starbucks’ EPS have grown at an average rate of 21%. Over the past four quarters (excluding 4Q15), the company’s EPS have grown at an average of 20%.
  • Overall EPS growth for fiscal 2015 has decelerated to 19% compared to 21% in 2014 and 23% in 2013.
  • This decelerating trajectory is a concern. It may have an impact on the company’s share price.

Series overview

To help you understand what led to Starbucks’ 4Q15 EPS, we’ll discuss some of the key things that affected Starbucks’ performance during the quarter. For example, we’ll look at same-store sales growth, which is key to Starbucks’ revenue. We’ll also discuss Starbucks’ progress in China. Starbucks is emerging in the Asia-Pacific market, with China having the strongest potential. We’ll look into Starbucks’ margin performance and wrap up this series with the valuation multiple for the company and its peers.

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