Starbucks (SBUX) released its fiscal 2019 second-quarter earnings on April 25. It reported adjusted EPS of $0.60 on revenue of $6.31 billion. In the quarter, Starbucks outperformed analysts’ EPS estimate of $0.56, while its revenue fell marginally short of analysts’ expectation of $6.32 billion.
Starbucks posted SSSG (same-store sales growth) of 3.0%, which beat analysts’ estimate of 2.9%. It also raised its EPS guidance for fiscal 2019 to $2.75–$2.79 from its earlier estimate of $2.68–$2.73.
Pershing Square Holdings thinks that Starbucks’ latest results lend further support to its belief in the company’s wide competitive moat and its long-term, high-single-digit revenue growth outlook.
Hilton Worldwide’s (HLT) recent results also reinforced Pershing’s view that the company’s strong value proposition and business model should allow it to compound its EPS at a mid- to high-teen growth rate for many years to come. After returning 28% year-to-date, HLT is trading at a PE ratio of 24x, which—according to the fund—is a discount to its historical multiple.
United Technologies (UTX) has contributed 2.9% of Pershing Square’s gains year-to-date. Another high-profile fund, Dan Loeb’s Third Point, also had a stake in UTX, which it exited in the fourth quarter. Loeb was pushing UTX to split into three separate businesses. In November 2018, UTX’s chair finally announced the split. The company’s rival General Electric (GE) is also splitting up to unlock its full value. Pershing believes that the company’s upcoming business separation will serve as a catalyst for significant future share price appreciation.