Market Overview

Starbucks and Yum! Brands to Open Near 52-Week Highs

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The Dow, Nasdaq and S&P 500 all closed up less than 1% yesterday, but plenty of stocks rose to 52-week highs in the trading session. Among them were Starbucks (NASDAQ: SBUX) and Yum! Brands (NYSE: YUM), which reached multiyear highs of $47.28 and $60.45 per share, respectively.

Starbucks' new, lighter “Blonde” roasts became available in cafes and supermarkets this week. Starbucks also has been raising prices on certain offerings in markets such as the Northeast and the Sunbelt. The global coffee shop operator has more than 6,700 locations and also offers its products in supermarkets. The Seattle-based company has a market cap of $34.9 billion and it was founded in 1971.

Its P/E and PEG ratios are a bit above the industry average, but so is the operating margin. The long-term EPS growth forecast is 17.6%, the return on equity is 30.9% and the dividend yield is 1.5%. The consensus recommendation of analysts is to buy the stock. The share price is up more than 9% in the past month, as well as about 45% higher than a year ago. The stock has outperformed competitors Dunkin Brands (NASDAQ: DNKN) and Caribou Coffee (NASDAQ: CBOU) over the past six months.

See also: Not the Way to Fight Starbucks.

Yum! Brands just announced that it will open 100 new KFC stores in Africa in 2012 as part of its global expansion. It also sold its A&W brand recently and is shopping around its Long John Silver chain. The Louisville, Ky.-based quick-service restaurant company, which also operates the Pizza Hut and Taco Bell chains, has some 37,000 restaurants in 110 countries. And it has a market cap of $27.6 billion.

Its earnings per share are anticipated to grow 12.8% over the next five years. The P/E ratio is a higher than the industry average but so is its operating margin. The return on equity is a healthy 69.7%. Short interest is less than 2% of the float. The share price is more than 18% higher than 90 days ago. But over the past six months, the stock has underperformed competitors such as Domino's Pizza (NYSE: DPZ) and McDonald's (NYSE: MCD).

ACTION ITEMS:

Bullish: Investors interested in exchange traded funds invested in Starbucks and Yum! Brands might want to consider the following trades:

  • PowerShares Dynamic Leisure & Entertainment (NYSE: PEJ) is more than 25% higher than the 52-week low.
  • Rydex S&P Equal Weight Consumer Discretionary (NYSE: RCD) is more than 24% higher than the 52-week low.
  • Vanguard Consumer Discretionary ETF (NYSE: VCR) is more than 23% higher than the 52-week low.
  • Consumer Discretionary Select Sector SPDR (NYSE: XLY) is more than 22% higher than the 52-week low.
Bearish:

Traders may prefer to consider these alternative positions in the same sector:

  • Chipotle Mexican Grill (NYSE: CMG) is up about 60% from the 52-week low.
  • Buffalo Wild Wings (NASDAQ: BWLD) is up more than 58% from the 52-week low.
  • Panera Bread (NASDAQ: PNRA) is up more than 48% from the 52-week low.
  • McDonald's (NYSE: MCD) is up more than 42% from the 52-week low.
Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.
 

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