Why Starbucks Shares Heated Up


Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Starbucks (NAS: SBUX) were brewing up big gains today, finishing 9% higher after after a strong earnings report and a dividend increase.

So what: Same-store sales increased 6%, while overall sales were up 11%. Adjusted EPS improved to $0.46 a share, from $0.37 in the quarter a year ago, and Starbucks also increased its quarterly dividend by 24%, to $0.21. Perhaps, most importantly, the coffee chain raised its fiscal 2013 EPS guidance to $2.06-$2.15. The growth of its Channel Development business, which includes items like K-cup portion packs, was strong at 32%, and its China/Asia-Pacific region again showed impressive results, with a 15% increase in comparable sales. Europe, on the other hand, was weak, with flat comps.

Now what: Starbucks' high valuation is often criticized, but this is a dominant, global brand that keeps finding new avenues for growth. In the next year alone, it is planning to add 1,300 new stores, up from 1,063 new stores in 2012, and a net addition of just 145 in 2011. With growth through international channels, new stores in the U.S., and home-based products and appliances, there are plenty of reasons to believe Starbucks will live up to its valuation.

Are you a Starbucks addict? Don't forget to add the company to your Watchlist by clicking here.

The article Why Starbucks Shares Heated Up originally appeared on Fool.com.

Jeremy Bowman has no positions in the stocks mentioned above. The Motley Fool owns shares of Starbucks and has the following options: short JAN 2013 $47.00 puts on Starbucks. Motley Fool newsletter services recommend Starbucks. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Originally published