The 'Big Surprise' Starbucks Just Unveiled On Its Conference Call

• Starbucks Corporation SBUX shares are up 9 percent in last three months, even after hitting a low of $50.34 on August 24.
• Credit Suisse’s Jason West maintained a Neutral rating on the company, while raising the price target from $58 to $61.
• The company reported solid sales momentum, despite a choppy environment, and its FY16 guidance surprisingly indicates that the first quarter is off to a strong start, West said.

Starbucks reported another set of robust quarterly results, “led by top line momentum at home,” analyst Jason West said. Same-store sales in the Americas came in at 8 percent growth, consensus expectations of 7 percent.

West believes that the current Americas comps are close to about 10 percent, representing “a tremendous result,” given the choppy spending environment and that the company is entering the seventh year of strong SSS.

“SBUX is clearly seeing strength across multiple levels of the business, including food, innovation, execution, & loyalty,” the analyst wrote.

Starbucks reported its EPS in-line with expectations, due to expectations being elevated. It also reported EBIT margins of 20 percent, which missed the Credit Suisse and consensus estimates by 20bps.

The company guided to FY16 EPS of $1.87-$1.89. “The big surprise was that SBUX guided global SSS to be "somewhat above mid-single digits". This is a departure from typical mid-single digit guide and suggests F1Q16 is off to a strong start,” West commented.

The EPS estimates for FY16, FY16 and FY17 have been raised from $1.85 to $1.89, from $2.10 to $2.16 and from $2.42 to $2.47, respectively.

Although Starbucks continues to “outdistance itself” from its restaurant peers, “this fundamental superiority” is already reflected in the company’s stock valuation, West said.