The coffee shop retail sector continues to brew and this is good news for coffee drinkers and investors who like to nibble on tasty treats.
A small taste of heavenly coffees
Specialty coffee maker Starbucks Corporation (NASDAQ:SBUX) and the old reliable Dunkin Brands Group Inc (NASDAQ:DNKN) continue to be beanery leaders.
These coffee chains appeal to different customer bases. Starbucks Corporation (NASDAQ:SBUX) and similar retail chains are the favorite of consumers who believe they are more hip about flavored lattes. On the other hand Dunkin Donuts is preferred by those who enjoy the simple pleasure of a reliable cup of brew while dunkin’ donuts. However, Dunkin Brands Group Inc (NASDAQ:DNKN) has broadened its brand by offering a wider variety of lattes and snacks to compete with the specialty chains. Of course, arguments over taste are no arguments at all – some will argue the specialty lattes taste like burnt offerings.
In any case coffee consumption is on the rise. According to the National Coffee Association, a recent survey found many of the adult population worldwide drinks coffee – about 109 million people. And 52 million of these folks live in America. In other words, they got an awful lot of coffee in Brazil, as the song goes and in lots of other places too.
Starbucks serves lattes muchos and ethics too
Starbucks Corporation (NASDAQ:SBUX) sells its java, snacks, and merchandise in 60 countries which gives the outfit a much broader base than Dunkin Brands Group Inc (NASDAQ:DNKN). And the company’s long standing logo of a Mermaid on each cup was replaced last year. So hold onto those older mugs – they could be a hot item on EBay in the fullness of time.
Meanwhile the coffee house of the global village has long made a connection between profits and its societal role. Not only has Starbucks Corporation (NASDAQ:SBUX) gained market share because of tasty lattes, the company provides all employees with health insurance. The coffee chain has also worked with environmental groups to buy coffee beans from small South American and Indonesian farmers above market rates.
On the numbers side of the beanery equation, the company expects full-year earnings in 2013 of $2.12 to $2.18 a share – higher than its earlier forecast of $2.06 to $2.15 a share. The current share price is closing in on $66/share just short of the 52 week high by a buck and change, so tip the baristas.
How much higher the price will go depends on factors like advancing its “ready to drink” brew into the US retail sector. The company also has bold plans to expand into the green tea land of China via the ready to drink line.
Dunkin Brands broadens its horizons
Since Dunkin Brands Group Inc (NASDAQ:DNKN)’s initial public offering in July 2011, they’ve been busy not only making donuts but also expanding the brand beyond the northeast. In fact, the coffee brewer has been opening new franchises across the U.S. The franchise model has historically served the outfit well since it enables quick expansion without the usual start-up costs. In fact, by the end of last year there were more than 10,500 Dunkin Donuts shops.
Dunkin Brands Group Inc (NASDAQ:DNKN) recently announced the opening of nine new shops this year in the Houston area. And the outfit sold this play to potential franchise entrepreneurs looking to get into the coffee game in Texas. And this is good news not only for those who like to dunk donuts, but investors who hope to profit from the caffeine buzz.
As a matter of fact, some analysts expect the company to earn $1.53 per share in 2013. And the expectations for next year are higher – $1.81 per share. This means an earnings growth rate of a bit less than 20% – a hill of coffee beans. Finally, Dunkin Brands – which includes more than 7,500 Baskin Robbins ice cream stores – also pays a dividend of 1.8%. In the final taste test, this gives investors a chance to drink from the cup of a company on the rise again.