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Buy, Sell or Hold Starbucks?

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    Lazard Capital Markets senior analyst Matthew DiFrisco gives his outlook for Starbucks earnings.

  • Duration 3:31
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-- -- Better -- is alright Starbucks reporting after the bell and I should you buy sell or hold that in the report Matthew difference goes senior restaurant sector analyst it was -- capital joins us now.

Matthew here come Starbucks non coffee products driving the result that's a key.

Today little bit yeah I think also though their traditional beverages you are seeing traffic come back to them.

They've done a great job their loyalty program they've expanded their product wanna -- beverages.

Food continues to grow and now we're looking forward to the -- -- take up machines are being rolled out -- stores with K cups as well.

The current -- in the evolution of pressure -- wanna ask you about but it really that got hit on coffee prices for fiscal 2012.

And -- night they took a hit.

If coffee prices go back up would you change your mind on start -- -- it's really never just traded around commodities but it has certainly hurt -- the last two fiscal years over forty cents of headwinds.

So that does give us our confidence in our earnings outlook which is certainly important the multiples had a pretty good expansion -- -- you do want to see earnings upside.

I think the FY thirteen numbers look conservative because the -- market has come back for them.

They've unfortunately locked in at higher rates it's come back so when you see FY thirteen prices that they can contract out you'll see some benefits in the margins and that's where we like the earnings upside.

Don't you ever you -- -- on the stock I think it's up 60% and only a year so.

Don't you ever feel like -- I just find something that's not up 60% a year -- -- it is always easier but sometimes things are working for a reason and I think that's gonna continue.

They've got a lot of new things ahead international growth China very early on K cups very early on.

In -- consumer grocery channel right now they're going in the like you said evolution fresh.

-- -- pressures as well they have a lot of new business line items that are very early on enough offer a lot of growth.

Longer term.

Yeah abolition fresh the concern there equality analysts have more than 70% still have a buying pounds Sabbath but the analysts are concerned about abolition fresh plan isn't generally be.

The -- -- story for ban.

It's gonna -- at the grocery stores that's not really what Starbucks wants out of this whole thing.

Sure I think a lot of people look at their grocery business in question is are going to migrate down to that consumer products.

Margin and I think they do a good job of -- explaining where they participate in the consumer products group.

Those are pretty high priced drinks so -- be competing against naked.

They cannot -- They could be up -- area they get.

-- -- -- -- be -- for sticking to your core competency Hannah and should be worried at all that Starbucks lately is going into juices is going in the single subconsciously and everywhere else but making your -- your coffee better but it's definitely added risk but I think if you look at the benefit and the -- reward McDonald's perfect example it's -- company who has.

Consistently bought not built out new sales verticals and I think that's what Starbucks is looking for their core business still is growing healthy.

Bomb and they're expanding their market share are within coffee certainly K -- is coffee still so -- brand dominance is there.

And they're looking at an interest in growth vehicles such as abortion fractional.

-- get what -- Green mountain medical for a for a company like Green mountain.

I mean is it visible at the current story overall for then do you think you're gonna stay away from them because occurred in Starbucks.

Could could maybe Green mountain be an option.

-- I'm I don't officially -- Green mountain but I think there's certainly relationship -- benefit both of them so Starbucks grows comments -- sales growth and I think Green mountain.

So from the overall category growing with the number one coffee brand in the world okay -- -- on -- all right so you're saying the basis.

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