Founded in 1971 in Seattle, Starbucks is one of the largest coffee retailers in the world.

Starbucks Beat by 14.29% in the Fiscal Fourth Quarter

On Nov 5, Starbucks reported its fiscal fourth quarter 2009 results and beat the Zacks Consensus Estimate by 3 cents. Earnings per share were 24 cents compared to the Zacks Consensus of 21 cents. That is a 140% increase over the 10 cents a share reported in the year ago quarter.

Revenue, however, fell 4% to $2.42 billion from $2.52 billion in the fourth quarter of fiscal 2008. Both the U.S. and International segments each saw a 4% decline in net sales. Comparable U.S. store sales slid 1% in the quarter.

By the end of fiscal 2009, the company had completed the majority of its previously announced store closings which included about 800 U.S. stores, 61 stores in Australia and 40 stores in other international markets.

Outlook for Fiscal 2010

With the majority of its store closings behind it, Starbucks appears more optimistic about the coming year. It is projecting revenue growth for fiscal 2010 in the low-to-mid single digits primarily due to what the company hopes is positive comparable store sales, a 53rd fiscal week and about 300 planned net new stores.

Starbucks is still looking overseas for its growth as it plans to open about 200 net new stores in the international market. In the United States, it will be looking to add about 100 net new stores.

Zacks Consensus Estimates Rise

Given the company's fourth quarter earnings surprise, analysts have moved to adjust estimates higher. The first quarter 2010 Zacks Consensus Estimate has jumped 3 cents to 26 cents in the last 7 days, with 5 analysts raising and 1 analyst lowering out of 15 total analysts.

Similarly, fiscal 2010 estimates rose 5 cents to 97 cents in the last week. Analysts expect 2010 earnings growth of 21.79%. Looking ahead, analysts are also bullish about fiscal 2011, projecting 15.41% earnings growth.

SBUX at 2-Year High

Starbucks' stock has been on quite a run. The Zacks #1 Rank (strong buy) stock has recently been hitting 52-week and 2-year highs.

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• Hyatt Hotels (NYSE:H) shares gained 12% on their NYSE debut.  The company sold 38 million shares at $25 per share

• JP Morgan (NYSE:JPM) lifted its price target on Ford (NYSE:F)

• The smartphone marketplace will watch today's launch of Verizon's (NYSE:VZ) much-heralded new "Droid" launch, using Google's (NASDAQ:GOOG) Android operating system

• AIG (NYSE:AIG) reported third quarter earnings of $2.85 ex-items

• Bernstein upgraded General Electric (NYSE:GE) and Amazon.com (NASDAQ:AMZN) shares

• JP Morgan (NYSE:JPM) upgraded Macy's (NYSE:M) shares

• Deutsche Bank (NYSE:DB) upgraded Blue Nile (NASDAQ:NILE) shares, lifting the price target from $30 to $50

• MBIA's (NYSE:MBI) main bond insurance unit was downgraded by S&P to non-investment grade status

• Dell (NASDAQ:DELL) revealed a new, high-end, ultra thin PC

• Cameron International (NYSE:CAM) reported a $500 million subsea equipment deal with Petrobras

• Howard Shultz, CEO of Starbucks (NASDAQ:SBUX), offered high hopes for its Via Ready Brew instant coffee product, claiming it "perhaps the biggest opportunity" in the company's history, amid today's North American launch

• Walgreens' (NYSE:WAG) reported fiscal fourth quarter results of 47 cents ex-items, topping estimates of 39 cents, on sales of $15.7 billion

• Goldman Sachs (NYSE:GS) lifted price targets on several retailers, including conviction buys on Target (NYSE:TGT) and Macy's (NYSE:M)

• Citigroup (NYSE:C) started coverage of Dr. Pepper Snapple (NYSE:DPS) and Coca-Cola (NYSE:KO) with "buy" recommendations

• Bank of America (NYSE:BAC) upgraded Phillips-Van Heusen (NYSE:PVH) to a "buy" with a price target of $54

• Valero Energy (NYSE:VLO) topped the list of yesterday's S&P500 gainers, up 6.6%, as Credit Suisse's (NYSE:CS) analyst asserted US refiners likely to see renewed interest based on the increase expected in energy demand

• Citigroup (NYSE:C) analysts upgraded Procter & Gamble (NYSE:PG) shares to "buy" from "hold," lifting the price target to $66 from $54 

• Piper Jaffray raised its rating on Starbucks (NASDAQ:SBUX) to "overweight" nad upped the price target to $24 from $13. The analyst expects earnings to grow at least 17% over the next two years

• JP Morgan (NYSE:JPM) raised its rating on KB Homes (NYSE:KBH) to "overweight" and its price target to $25.50 from $10

• Texas Instruments (NYSE:TXN) increased its quarterly dividend 9% to 12 cents from 11 cents a share

Starbucks Corp. (SBUX) said it would recall about 530,000 coffee grinders sold in the last 7 years after receiving complaints from users who suffered unexpected injuries while trying to clean the machines.

"Consumers should immediately stop using the coffee grinders," the Seattle-based company said on Tuesday referring to the Starbucks Barista Blade Grinder and Seattle's Best Coffee Blade Grinder. Both grinders were made by a Chinese firm and sold by Starbucks between March 2002 and March 2009.

Separately, the Wall Street Journal reported that Starbucks was mulling a change in the way it grinds and brews coffee in order to make the "Starbucks experience" more attractive amid the recession.

Shares of the company fell more than 1% to $13.88 at noon on the NASDAQ.

Full analysis of all these stocks is available at http://at.zacks.com/?id=2676.

Here is a synopsis of all five stocks:

Bull of the Day:

We maintain our Buy recommendation for Vodafone (VOD), the largest revenue-generating international wireless carrier. Operating results for fiscal 2009 were highlighted by respectable increases in subscriber count bolstered by record net additions for its Indian operation.

Vodafone continues to accelerate 3G wireless service deployments and expanding network availability across Asia, Eastern Europe and Africa, primarily through acquisitions. Additionally, the company is focused on improving shareholder returns through increased dividend payouts, which supports our valuation forecasts.

Management's outlook for fiscal 2010 appears favorable as operating results are expected to improve with continued growth across incipient markets coupled with ongoing cost saving initiatives and currency exchange translation gains.

Bear of the Day:

On June 4, 2009, Somaxon (SOMX) announced that is has resubmitted the new drug application (NDA) to the U.S. FDA for Silenor (doxepin) for the treatment of insomnia. Despite this good news, we struggle to see how this drug can capture enough of the insomnia market to drive Somaxon to strong profitability.

The insomnia market is dominated by generic molecules, and without an onset claim, Silenor will already lose out on approximately half the market. Plus, Somaxon is running dangerously low on cash. We estimate the current cash balance is only enough to fund operations until July 2009.

Therefore, we expect a highly dilutive (30-40%) capital raise in the next week or two. We have a Sell rating on the shares and a target price of $0.50.

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MCD Sizzles, But FX to Take a Bite

McDonald's Corporation (MCD) continues to report strong worldwide same-store sales but, as expected, foreign currency translation remains a drag on earnings.

Much of the foreign exchange [FX] drag -- expected to be $0.20 for 2009 -- was already factored into estimates or offset by anticipated declines in commodity costs in 2H09. In turn, we are trimming our 2009 EPS estimates by just $0.04 to $3.78 and maintaining our Buy rating on what we consider a defensive safe haven in a dangerous market.

McDonald's announced today that global same-restaurant sales jumped 5.1% in May, with overseas operations remaining strong and those in the U.S. moderating. Comps in in the U.S. grew 2.8% in May -- respectable given the powerful 7.7% rise in May 2008, though slower than the 6.1% reported in April. In Europe, comps surged 7.6%, and in Asia/Pacific, Middle East and Africa they grew 6.4%.

McDonald's U.S. sales were fueled by its successful recent rollout of McCafe coffees. The new premium coffee line has an appealing ad campaign and is likely to draw value-conscious customers away from the $4 lattes at Starbucks (SBUX).

Europe benefited as restaurants added breakfast and extended their late night hours. Notably, Germany -- a very weak area for Burger King -- continued to post positive comps.

Strong sales in Australia and Japan juiced strong Asia/Pacific comps. McDonald's has successfully tailored its menu offerings to local tastes.

China, where McDonald's represents a more expensive meal, remains one area of weakness. China's contraction, however, should have a much bigger effect on Yum! Brands Inc (YUM), which derives 28% of its revenue there.

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Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.

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Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.

* Starbucks (NASDAQ:SBUX) reported fiscal second quarter earnings of 16 cents ex-items versus 15 cents, beating estimates of 15 cents a share, as revenues fell 7.6% to $2.33 billion, missing estimates of $2.36 billion

* Motorola (NYSE:MOT) reported a first quarter loss of 10 cents a share, topping estimates by one cent, versus a 5 cent loss a year ago, as revenues fell 27.9% year-over-year to $5.4 billion

* Eastman Kodak (NYSE:EK) reported a loss of $1.34 per share in the quarter, a $1.01 miss versus a 39 cent loss a year earlier, as revenues fell 29.4% year-over-year to $1.5 billion

* Comcast (NASDAQ:CMCSA) reported its first quarter topped estimates by 4 cents, coming in at 27 cents as revenues decline 5% year-over-year to $8.4 billion

* Colgate-Palmolive (NYSE:CL) reported first quarter earnings of 97 cents a share, one cent better than expected versus 90 cents a year ago, as revenues declined 5.7% year-over-year to $3.5 billion

* Dow Chemical (NYSE:DOW) reported first quarter earnings of 12 cents ex-items, 33 cents better than expected versus 99 cents a year ago, as revenues fell 38.7% year-over-year to $9.1 billion

* Exxon Mobil (NYSE:XOM) reported a 2 penny miss as earnings fell to 92 cents a share from $2.03 a share a year earlier

In a marketplace given to looking forward six months or so, investors did not have enough reason to rejoice as the latest growth data showed GDP fell at an annual rate of 6.1% from January through March.  Nevertheless, investors looking for reassuring signs did find consumer data somewhat comfortable.  And U.S. Federal Reserve's observation that the rate of economic contraction was "somewhat slower" was an added relief.  Markets shrugged off reports suggesting Chrysler's imminent bankruptcy and media reports that at least one-third of the stress-test banks may require additional capital.  At the end of the day, the DJIA closed up 2.1% to its highest since February 9, the tech-heavy NASDAQ was up 2.3% to its highest since November 4, and the S&P up 2.2% to its highest since January 28. 

The NASDAQ has now surged 25% from February 27, for its best two-month run since 2002, and is up 34.9% from its March 9 closing low. The S&P has gained 29.1% and the DJIA 25% from March 9 levels. Also, the CBOE Vix "fear factor" index fell 4.9% in yesterday's trading to 36.08, signaling a less volatile environment. Exxon Mobil (NYSE:XOM) joined IBM (NYSE:IBM) in declaring a dividend hike, lifting its quarterly payout by 5% to 42 cents. Despite flu-related worries, a weak GDP report and a huge inventory build up, crude prices rallied 2.2% to $51. As investors took to risk assumption, the prices of Treasuries continued lower, with the 2-year off 0/32 to a yield of 0.954%, and the 10-year off 26/32 to a yield of 3.107%.

Among the ten S&P sectors, nine moved higher Wednesday, with only telecom stocks heading southwards, with a 0.3% drop.  Financial shares led the advance with a 4.6% gain. On the DJIA, banking stocks also topped the list of advancing issues, with Citigroup (NYSE:C) advancing 8.0%, Bank of America (NYSE:BAC) rising 6.5%, and JP Morgan (NYSE:JPM) recording a 5.2% gain. News that shareholders had stripped Bank of America's (NYSE:BAC) CEO Lewis of his Chairman title failed to dampen spirits, with the stock rising 6% in premarket trading. Last night's First 100 Days news conference revealed Obama anxious to lose the mantle of government involvement with the banking industry, ameliorating fears of a backdoor-entrance into banking nationalization.

Yesterday's earnings news also surprised on the upside with better-than-expected earnings from Aetna (NYSE:AET), Baker Hughes (NYSE:BHI), General Dynamics (NYSE:GD), Hess (NYSE:HES), Starbucks (NASDAQ:SBUX), Time Warner (NYSE:TWX), Visa (NYSE:V), Waste Management (NYSE:WMI), and Wyeth (NYSE:WYE).

Wednesday's economic posts indicated advance US GDP fell a worse-than-expected 6.1% during the first quarter, following the fourth quarter's 6.3% drop.  The decline widely missed the expected 4.7% drop. However, the data revealed businesses cut inventory levels at the fastest pace in the past decade, lifting hopes of a turnaround on future builds. Moreover, the key ingredient of consumer spending rose 2.2%, following a 4.3% fourth quarter drop, signaling resiliency in the segment, which represents 70% of the total economy. Wal-Mart (NYSE:WMT) added to such hopes, noting increased consumer purchasing of non-essentials such as sporting goods and bedding.

The FOMC monthly interest rate decision provided the as-expected news that the Fed plans to keep key interest rate levels at 0.00%-0.25% for an extended period as the fragile recovery gains footing.

Today's data include weekly initial claims, expected to show continued gains, with jobless claims up 5,000 to 645,000 from 640,000 the previous week. March personal income is expected to match the prior month's 0.2% decline; personal spending is expected to show an 0.1% drop versus February's 0.2% advance. The Chicago Purchasing Managers Index is likely to show an increase to 34.0 in April from 31.4.

Why? Because due to the QQQ's unusual weighting methodology, Apple accounts for 12.6% of the fund's assets. For comparison, Microsoft makes up only 4.8% of the ETF, despite having a significantly larger market cap than Apple: $166 billion vs. $108 billion.

The market-cap oddities don't end there. Google counts for just 4.7% of the fund, despite having a market cap of $120 billion, almost identical to Apple. And Google's weight is just a shade above Gilead Sciences, a biotech company that accounts for 3.5% of the fund, despite having one-third of the market-cap of Google.

Confused?

The oddities trace back to the Nasdaq-100's methodology. The index is officially a "modified market-cap-weighted index." New companies entering the index are weighted essentially based on their market cap. But once they're in the index, the weight of companies rises and falls based on that company's stock price, with no real rebalancing as other components are added and subtracted from the index.

Apple was added to the index long ago, and the stock has been one of the better-performing equities over the past decade. As a result, its weight in the index has grown and grown and grown.

It's a potential weak point for the fund. If Apple stumbles, the QQQs will suffer.

Curiously, few people comment on the QQQ's unusual weighting methodology. Instead, there seems to be much more criticism of the fact that the fund is not a true "pure-play" technology fund.

People love to point this out, and it's true. According to PowerShares, the fund is 62% invested in technology, with significant chunks in health care (17%), consumer discretionary (13%) and industrials (6%).

When you buy QQQ, you are buying into companies like Apple, Intel and Cisco. At the same time, you're also buying the generic drug manufacturer Teva Pharmaceuticals (2.6% of the fund); retail shops like Starbucks (1.1%), Bed Bath & Beyond (0.9%) and Costco (0.9%); as well as industrial firms like Paccar (1.1%).

This criticism misses the point. There are plenty of pure-play tech ETFs out there, such as (by order of assets):

• Technology SPDR (XLK)
• iShares DJ Tech (IYW)
• Vanguard Info Tech (VGT)
• iShares GS Tech (IGM)
• SPDR MS Tech
• PowerShares Dynamic Tech (PTF)
• First Trust Nasdaq-100 Tech (QTEC)
• Rydex S&P Equal Weight Tech (RYT)
• First Trust Tech AlphaDex (FXL)

If you truly want "Technology" (with a capital T), you'd buy one of these funds.

But I'm not convinced that most investors who buy the QQQs truly want "Technology" exposure. What they're looking for is high-beta, growth-oriented, tech-driven exposure. And to that end, the QQQs deliver.

Consider, for example, the second-largest sector in the fund: health care. Nearly all of the health care names in the QQQs - Genzyme, Biogen Idec, Intuitive Surgical - are tech-driven companies, even if they are technically not "Technology" firms. Even a decent portion of the consumer discretionary sector is made up of names that could be considered tech-related (Amazon.com, Garmin, DirecTV, Expedia). They don't fall into the official GICS Technology category, but they reflect the same general economic and market trends.

Investors who buy the QQQs may say they are looking for "Tech." But what they're really looking for is tech-driven, high-growth companies. And to that end, the QQQs deliver.

Now if they could just fix that strange market-cap issue ...

In addition to Ackman himself, his hedge fund Pershing Square's nominees include Winthrop Realty Trust (FUR) Chief Executive Michael Ashner, ex-Starbucks (SBUX) CEO Jim Donald, Professor Ronald Gilson and Richard Vague, the former CEO of First USA, Juniper Financial and Barclays Bank Delaware.

"If elected, we believe they will substantially improve Target's ability to navigate through the current economic environment while increasing shareholder value over the long term," Ackman said.

Pershing Square is Target's third-largest investor, with beneficial ownership of about 7.8% of its outstanding common stock. Ackman has long held that Target's stock is undervalued and urged the Minneapolis-based company to sell its credit card portfolio. His decision for the proxy fight comes after Target declined to invite him to join the board.

Target was up more than 5% to $30.31 at noon on the New York Stock Exchange. The S&P Retail Index rose 4.3% to 266.33.

Green Mountain Coffee Roasters is a growth company in the premium coffee and tea industry. Management is implementing a growth strategy based on a multi-channel geographic penetration business model. The company is expanding geographically and by adding new relationships.

Having generated 24 consecutive quarters of double-digit sales growth and twelve consecutive quarters with growth in excess of 25%, the stock is fairly valued at a premium P/E. The Hold rating is maintained due to high valuation and rising input costs.

Read the full analyst report on GMCR.

Read the full analyst report on PEET.

Here’s a curious development that may be worth watching: Bloomberg is suing the Federal Reserve.

Last week, we took a look at the Fed’s bulging $2 trillion balance sheet. And if you’re a long-suffering 5 Min. reader, you know our futile recounting of the weekly Fed lending programs… all the abbreviations and…

The first Burger King (NYSE:BKC) will open in Prague in the next few months. And it’s not only targeting the Czech Repbulic. It wants to become number one in European markets. To do that, it’s already got operations in Poland, Bulgaria and Hungary, and it planning joints in Slovakia and Slovenia.

But it’s got tough competition from McDonald’s (NYSE:MCD), who is top dog right now with 70 restaurants serving 53 million customers. It’s spent more than $172.2 million on restaurants in the Czech Republic.

When I was in Budapest, I grabbed a Whopper for a quick lunch before meeting my guide back at the hotel, Buro Panzio. It cost me 750 Forint,…

Maverick Capital Management Holdings Analysis

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Blue Ridge Capital | John A. Griffin Holdings Analysis

Related to Investment Securities/Holding Tool:

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• Geographical Hedge Fund Guides
• Hedge Fund Database

The company has marshaled support for its service from leading device manufacturers such as Dell (DELL), iRiver, and Creative Labs. Furthermore, Napster is targeting the music-enabled cell phone market. Partnering with Ericsson (ERIC), Napster has put together a demo of a wireless solution and is in discussions with major carriers.

Napster faces stiff competition because many big players have concentrated on the emerging digital music market. The company competes against RealRhapsody (RNWK), MusicMatch, Apple Computer's (AAPL) iTunes Music Store, and Sony (SNE) Connect in the U.S. The competition is likely to intensify with the entry of giants such as Wal-Mart (WMT) and Starbucks (SBUX) in this space. On the international front, the company is likely to face pressure from Apple, which has launched its music service iTunes in the United Kingdom, France, and Germany.

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Read the analyst note on AAPL

Read the analyst note on SNE

Recent Events

The company recently reported that worldwide same-store sales surged 8.5% in August.

The announcement was made on Tuesday, which saw the Dow shed 280 points, but MCD jumped 1.2%.

Menu additions drive sales growth

McDonald s has increased the variety of choices on its menu to cater to changing customer tastes and dietary inclinations. The company has introduced Chicken Selects made from chicken breast in response to the increased consumer proclivity for white meat in recent years. The chain has also successfully introduced a large number of healthier menu items such as salads, granola and yogurt, and apple slices. The premium coffee, now offered in 12,800 restaurants, rollout has been very successful and the company plans this year to introduce a cappuccino bar in many of its stores, priced below Starbucks, intended to expand the breakfast and afternoon dayparts.

Developmental License Strategy

The company continues to pursue a developmental license strategy in countries where there is limited upside relative to risk. It would also take advantage of local entrepreneurs. For this purpose, the company has identified markets typified by primarily company-operated restaurants in Latin America and APMEA (Asia/Pacific, Middle East and Africa). These markets are intended to transition to a developmental license structure. This would benefit both customers and shareholders.

Strong balance sheet management

The company is also focused on cost-control initiatives, leveraging G&A expenses, and using the cash generated from operations to retire debt, distribute dividends, and pursue share repurchases. From 2007 through 2009, management expects to return approximately $15 billion to $17 billion to shareholders through dividends and share repurchases.
"MCD" Free Stock Analysis: Buy? Sell? Hold?
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