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Market Update

Earnings on Tap: Starbucks

Starbucks is well-positioned to evolve into a world-class consumer packaged-goods company, as a result of its well-recognized brand and continued diversification efforts.

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 Starbucks (SBUX) will be reporting latest figures after the bell Thursday, with analysts expecting earnings per share of $0.53 for the third quarter compared with $0.43 per diluted share reported in the corresponding period a year ago.

In the March quarter, the company's earnings came in line with Street estimates even as revenues increased 11% to a second-quarter record of $3.6 billion. Starbucks also posted record second-quarter earnings per share of $0.51, which included a $0.03 nonroutine gain on the sale of the company's equity in the joint venture that operates Starbucks stores in Mexico.

The company also raised its full-year earnings-per-share target range to $2.12 to $2.18 from the previous target range of $2.06 to $2.15.

Earlier this week, Starbucks and  Danone (DANOY) announced a joint venture whereby the firms intend to distribute a line of yogurt offerings through Starbucks outlets beginning next spring and in 2015 through grocery stores. 

Morningstar analyst R.J. Hottovy views this development as the latest step in the company's channel and brand diversification efforts. Hottovy believes the firm could evolve into a world-class consumer packaged-goods company due to a well-recognized brand and unique ability to connect with grocery and mass-channel customers through licensed on-premise stores. 

After gaining around 24% since the start of this year, the stock is presently trading near Morningstar's fair value estimate.

Gazala Parveen does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.