Starbucks to Buy Back 25M Shares - Analyst Blog

By Zacks | November 20, 2012 AAA

Coffee giant Starbucks Corporation (SBUX) recently announced that its board of directors has authorized the repurchase of up to 25 million of its common stock. This approval is in addition to the existing 12.1 million shares available for repurchase at the end of fiscal 2012.

As of September 30, 2012, Starbucks repurchased 184 million shares worth $5.1 billion under the share repurchase program that was first authorized in September 2001.

The most recent share repurchase authorization indicates strong liquidity position of the company. Starbucks has cash and cash equivalents of $1.19 billion as of September 30, 2012. The company has been using its cash to support growth strategies and return value to its shareholders.

In this respect, it is worth noting that Starbucks raised its quarterly cash dividend by 24% (from 17 cents previously) to 21 cents in the fourth quarter of 2012. The increased dividend will be payable at the end of November 2012.

As a part of its growth strategy, Starbucks also increased its store opening target from 1200 to 1300 driven by further acceleration in China and the Asia/Pacific region.

During the fourth quarter of 2012, the company benefited from strong global same store sales, improving revenue trends in the U.S., strong growth in China and continued momentum in the Channel Development segment.  

We are encouraged by Starbucks' strong market standing, new product launches, and rapid growth in China as well as a solid turnaround in its U.S. business.  However, poor sales in Europe due to depressed macroeconomic conditions keep us on the sidelines.

We currently have a Neutral recommendation on Starbucks, a peer of McDonald's Corp. (MCD). The stock carries a Zacks #2 Rank (a short-term 'Buy' rating).

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