The Zacks Analyst Blog Highlights: Starbucks, Dunkin' Brands, Bristol-Myers Squibb, AstraZeneca and Pfizer


For Immediate Release
Chicago, IL – July 25, 2014 – announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Starbucks (SBUX-Free Report), Dunkin’ Brands (DNKN-Free Report), Bristol-Myers Squibb Company (BMY-Free Report), AstraZeneca (AZN-Free Report) and Pfizer (PFE-Free Report).
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Here are highlights from Thursday’s Analyst Blog:

Starbucks Brews Positive Earnings, Dunkin’ Melts
Starbucks (SBUX-Free Report) reported earnings after the bell today.  Earnings came in ahead of the Zacks Consensus Earnings Estimate of $0.66 per share by posting Q3 earnings of $0.67 per share.  Revenues came in above the Zacks Consensus Revenue Estimate of $4.158 billion, by posting revenues of $4.2 billion. 

Strong performances by Teavana teas, the continued rollout of La Boulange pastries and sandwiches, and the introduction of carbonated drinks helped increase SSS by 5.1%, beating the consensus estimate of 5%.  Further, China saw SSS grow by 7%, and overall operating margins grew 18.5%.  These positives caused management to raise full year EPS estimate from $2.65-$2.67 to $2.70-$2.72.

There had been concern that coffee bean prices would impact the top line due to fears around Brazil’s coffee crop this year.  But recent rains have help to alleviate those concerns.  Moreover, management has had the foresight to hedge their coffee prices by locking in (below FY14 levels) a large percentage of their FY 15 coffee needs.  This should create a strong tailwind into and through 2015, and or protect against any unforeseen issue with crops.  Further, it gives the company pricing power over their rivals. 

In May of 2013, Starbucks began their assault on their competition by discounting bags of coffee that are sold in grocery stores by $1.00 for eponymous beans and its more common brand Seattle’s Best.  This plan enabled the company to take a larger share of the market.   The discount was a direct attack upon the low end of the coffee market. 

According to Rita McGrath, professor at the Columbia Business School, “Cutting prices on its bags of coffee also takes a swing at the competition’s knees.  By committing to lower prices (and not using coupons or sales), Starbucks is sending a signal.  It’s serious about the low end of the market; Dunkin’ Donuts, Folgers, and other competitors can either trim their margins further, or give up volume.  Either way they lose.” 

Dunkin’ Brands (DNKN-Free Report) reported earnings before the bell this morning, and the Starbucks impact is very evident.  Dunkin’ Brands met the Zacks Consensus Earnings Estimate of $0.47, but missed the Zacks Consensus Revenue Estimate by $7.6 million. 

The revenue miss was due to several factors; SSS growth did not meet expectations (U.S. Dunkin’ Donuts +1.8%, U.S. Baskin-Robbins +4.2%), SSS declines Internationally (Dunkin’ Donuts -3.1%, Baskin-Robbins -1.6%).  This caused management to lower its earnings and sales targets for the year.  According to Chief Executive Nigel Travis, “Second quarter sales growth was below our expectations, with Dunkin’ Donuts U.S. comparable store sales not accelerating as fast or to the degree that we anticipated after a difficult first quarter.”

Therefore, management reduced full year adjusted EPS from $1.79-$1.83 a share to $1.73-$1.77.  Further, the company trimmed revenue growth expectations from 6%-8% to 5%-7%.  And finally management reduced U.S. SSS expectations from 3%-4% to 2%-3%. 

In afterhours trading, SBUX is down less than 1% on mild volume, and DNKN saw a price decline after the earnings announcement, but was able to recapture some of those losses throughout the day, and ended the day down 4.6% from the previous day’s close. 

Bristol-Myers Beats in Q2, Maintains Guidance

Bristol-Myers Squibb Company’s (BMY-Free Report) second quarter 2014 earnings (excluding special items and the diabetes business divested earlier in the year) of 46 cents per share beat the Zacks Consensus Estimate by 2 cents. Adjusted earnings in the second quarter of 2014 were 12% above the year-ago figure due to lower costs.

Including one-time items, Bristol-Myers’ second quarter 2014 earnings came in at 18 cents, down 37.5%. Reported earnings declined primarily due to the sale of most of its diabetes business to AstraZeneca (AZN-Free Report). The divesture, excluding China, was completed in Feb 2014.

Net sales in the second quarter of 2014 (excluding revenues from the divested diabetes business) climbed 7% to $3.9 billion, driven by strong sales of drugs targeting the oncology market. Strong sales of rheumatoid arthritis drug, Orencia, also boosted the top line in the reported quarter. Revenues (including the divested business) slipped 4% to $3.9 billion. Revenues were in line with the Zacks Consensus Estimate.

The Second Quarter in Detail

The company posted disappointing sales in the U.S. and international markets, where net sales declined 7% to $1.9 billion and 1% to $2.0 billion respectively.

Key cancer drugs at Bristol-Myers however performed very well in the second quarter of 2014. Leukemia drug, Sprycel, registered sales of $368 million, up 18%. Skin-cancer drug Yervoy, approved in the U.S. and EU in 2011, contributed $321 million to total revenues during the reported quarter, up 38%. Sales of another oncology drug, Erbitux, also improved during the quarter. Erbitux sales climbed 9% to $186 million in the reported quarter.

The performance of key drugs in the virology unit was disappointing. Sales of Baraclude declined 1% to $369 million. Sales of HIV treatments Reyataz and Sustiva also dropped 16% and 12% to $362 million and $361 million, respectively.

Global sales of Abilify, approved for the treatment of schizophrenia and depression, declined 1% to $555 million. The drug however performed encouragingly in the U.S. with sales climbing 10%. Sales of Orencia stood at $402 million, up 14%.

Sales of anti-clotting drug Eliquis were $171 million during the reported quarter, up 61.3% sequentially. In Mar 2014, Eliquis was approved in the U.S. for an additional indication – to bring down the risk of blood clots in patients who have undergone hip or knee replacement surgery. The drug also received a positive opinion from the EU advisory committee for the treatment of deep vein thrombosis (DVT.V) and pulmonary embolism (PE) and the prevention of recurrent DVT and PE in adults. Successful label expansion will boost the sales potential of the drug. Bristol-Myers has a partnership with Pfizer (PFE-Free Report) on Eliquis.

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