Leading roaster and retailer of specialty coffee, Starbucks Corporation (NASDAQ:), reported solid fiscal third-quarter results last July, and is expected to report fourth-quarter results on October 22.

Starbucks is in a strong position to generate earnings growth due to changes it has made over 18 months.

Starbucks has my full support. (See SBUX stock charts on TipRanks)

Earnings Recap

In the Americas, Starbucks reported a significant recovery of revenue in comparison to the corresponding quarter last year, clocking in year-over-year comparable store sales growth of 83%.

The absence of COVID-19-related costs, pricing and business recovery, as well as temporary subsidies from the government and benefits of store conversion, led to an increase in operating margins of 24.4%, up from 14.4% the previous year.

In the past 12 months, 1,175 new net stores were opened. Strong international revenue growth was also achieved thanks to a 10% positive impact of foreign currency translations.

Expanding Through Partnerships, Innovation

The company expects to open 1,100 new Starbucks stores worldwide in Fiscal 2021.

Global Coffee Alliance is a partnership between Starbucks (NSRGY) and Nestle (OTC :)), gives the latter permanent rights to market Starbucks products worldwide outside of its shops. This partnership has allowed Starbucks to expand its reach globally in new markets and through new channels.

This partnership covers many products and brands, such as Nespresso, Seattle’s Best Coffee, Teavana, Torrefazione Italia, and more.

The alliance helped Starbucks to become a well-known brand in less developed regions like Asia. It also played a significant role in helping Starbucks finish the previous fiscal year at the top of the list. Starbucks is the No.1 coffee brand worldwide.

The sales of ready-to-drink Starbucks products outside the alliance saw double-digit growth across EMEA, China, and the United States, while the North American partnership with PepsiCo Inc. (NASDAQ) resulted in a 19% increase in coffee consumption.

These results show Starbucks exceeding expectations for revenue growth and earnings growth. This will help to fuel growth in the post-pandemic years.

Starbucks has continued to develop in high-growth categories like Cold Brew, Draft Nitro and plant-based modifiers, such as almond, coconut, soymilk substitutes, and draft Nitro beverages.

The company’s Reserve Roastery in Seattle is another splendid innovation, where customers can experience a working roastery connected to a café.

Starbucks also collaborated in China with Beyond Meat (NASDAQ 🙂 to launch a plant-based menu that will be available at 3300 Starbucks stores. Starbucks is close to introducing plant-based sandwiches into Canada.

Starbucks currently has 5,100 locations in China. It plans to reach 6,000 by the end the year. The company also launched its flagship store in China on JD.com (NASDAQ) during the last quarter. This is one of China’s most popular ecommerce sites.

Wall Street’s Take

Based on the ratings of 17 analysts offering 12-month price targets, Starbucks stock comes in as a Moderate Buy. SBUX stock’s $132.14 average target price implies an 16.3% upside over the current market price.

Bottom Line

Starbucks is continuing to expand its presence in global markets through partnerships, and the company maintains an unwavering focus on upgrading its menu as well.

These initiatives will help Starbucks to report an increase in revenues once all mobility restrictions have been lifted. Starbucks’ post-pandemic period looks bright, with its stock price likely to rise in line with earnings.

Dilantha De Silva didn’t hold any position in the securities discussed in this article at the time it was published.

Disclaimer: This article is solely the author’s opinion and does not reflect the opinions of TipRanks and its affiliates. It should only be used for informational purposes. TipRanks does not warrant the accuracy, reliability or completeness of this information. The article does not constitute a solicitation or recommendation to buy or sell securities. This article is not intended to provide advice on legal, professional investment or financial matters. TipRanks, its affiliates, disclaim any liability or responsibility in relation to the content. You are responsible for your actions based upon the articles. TipRanks and its affiliates do not endorse or recommend this link. Past results and prices are not an indication of future performance.

References

FQ3 earnings call transcript: https://s22.q4cdn.com/869488222/files/doc_financials/2021/q3/SBUX-Q3-2021-Earnings-Call-Corrected-Transcript.pdf

Menu innovation: https://stories.starbucks.com/stories/2020/plant-based-menu-innovation-at-starbucks/

Global Coffee Alliance: https://stories.starbucks.com/press/2018/starbucks-and-nestle-form-global-coffee-alliance/

Starbucks launches on JD: https://jdcorporateblog.com/starbucks-launches-flagship-store-on-jd-com/

FQ3 earnings release: https://investor.starbucks.com/press-releases/financial-releases/press-release-details/2021/Starbucks-Reports-Record-Q3-Fiscal-2021-Results/default.aspx