Starbucks Is Outperforming Peers In The 'Oligopolistic Premium Grocery Coffee Market'
Starbucks Corporation (NASDAQ: SBUX) would likely generate mid- to high-teens annual EPS growth, Wedbush's Nick Setyan said in a report. He maintained an Outperform rating on the company, with a price target of $70.
Starbucks' growth is expected to be driven by "Americas comp momentum, accelerating CAP unit growth, a successful EMEA turnaround, and multiple CPG and emerging market opportunities," Setyan mentioned.
CPG Gains To Continue
JAB Holding Company's acquisition of Keurig Green Mountain Inc (NASDAQ: GMCR) marks a "shift toward a more oligopolistic premium grocery coffee market," Setyan commented. He added that JAB may acquire more and the lower competition would benefit Starbucks.
"Our analysis indicates that in environments with comparable relative pricing and absent dramatic discounting from key competitors, SBUX tends to outperform peers," the analyst noted. While the EMEA and China CPG contributors have the potential to be meaningful, it was too early to make an assessment.
America Comp Momentum
Setyan believes that the US comp run-rate would continue in the mid-single digit range, "with Starbucks' high-end strategy a key near-term focus."
Higher Coffee Cost
Arabica coffee has risen 15-20 percent y/y and ~30 percent since its February lows. Starbucks is currently ~50 percent locked for its FY17 coffee needs. The analyst mentioned that this means coffee price movements would impact the company's margins in 2H17 and FY18.
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Latest Ratings for SBUX
|Oct 2016||RBC Capital||Maintains||Outperform|
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