Cheaper Commodities Benefiting Starbucks (SBUX) - PiperJaffray

Piper Jaffray analyst, Nicole Miller Regan, noted that spot coffee prices moved lower through the first two months of 2016 and now sit at (17%) on a YTD YoY basis through March. Starbucks (NASDAQ: SBUX) has already locked in ~90% of its FY16 coffee needs at slightly favorable prices to FY15 but the company remains well-positioned into 2016 even if inflation were to eventually work its way back into spot coffee prices.

The latest channel checks leave the analyst feeling confident that Starbucks is well-positioned to continue driving strong same-store sales trends in 2016. The company's ongoing food and beverage innovation efforts (such as the new Evolution Fresh juice drinks and new food items) are being well-received by consumers. This helps set up the opportunity to grow additional day part occasions and experiences going forward. Checks suggest March's "Happy Mondays" promotion series (offering targeted discounts on certain food/drink platforms in the early afternoon period) create opportunities to drive incremental traffic and sales.

Following the checks the analyst increased her blended 2Q16 same-store sales estimate to +6.3% (vs 5%), including estimates of +7.0% in the Americas, +3.5% in EMEA, and +5.0 in CAP. No change to EPS of $0.39 (in-line with the street).

Starbucks is scheduled to report fiscal 2Q16 earnings Thursday April 21 after the close.

No change to Overweight rating and $72 price target.

For an analyst ratings summary and ratings history on Starbucks click here. For more ratings news on Starbucks click here.

Shares of Starbucks closed at $60.13 yesterday.

You May Also Be Interested In