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Two Companies are Emerging from the Recession Stronger Than Ever: Starbucks and Panera Bread Company

November 23, 2010 | About:

INVESTMENTU

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It’s no surprise that investors have become more bullish on two companies recently. Take a look at their recent highlights…

  • Both reported significant year-over-year revenue growth in the third quarter.
  • Both have seen their shares rise 30% or higher since the start of 2010.
  • Both have seen shares rise 6% or higher since the start of November.
Let’s take at closer look at them both, starting with the strongest gainer – a Seattle giant worth more than $22 billion…

Starbucks Puts Recession in the Rear-View Mirror and Returns to Profitability

In March, Starbucks (SBUX) announced it would have its first profitable year since the recession started in 2007.

According to CEO Howard Schultz, “We made very tough decisions… but together were able to take nearly $600 million of costs out of the company while building new muscle in our operations.”

Part of that “muscle” included a resurgence of sales and the success of emerging brands like Starbucks VIA Ready Brew.

And just eight months later, the world’s largest chain of coffeehouses has recovered superbly. During its most recent quarter, net revenue grew over 17% to $2.8 billion – its most profitable quarter to date.

It’s quite a turnaround from 2008 when Starbucks shut down 600 of its locations to save costs. Today, it’s making plans to build more than 1,000 stores in China, where coffee-buying is set to triple over the next 10 years according to Boston Consulting Group Inc.

And that’s not all…

Restaurants like Burger King now serve Starbucks’ Seattle’s Best brand – a brand whose sales have catapulted from $50 million a year when Starbucks acquired it in 2003 to an annual $500 million today.

In light of its recent success, Starbucks recently raised its 2011 EPS guidance from $1.41 to $1.47 per share – a move that prompted analysts from Piper Jaffray and UBS to issue “buy” ratings on the stock.

Meanwhile, another national chain is making big strides to grow its presence, too. The company was just added to Forbes‘ “100 Fastest-Growing Companies” list. And its success over the coming years may soon land it a spot alongside Starbucks on the Forbes Global2000…

Panera’s Hard Work in 2010 Could Double its Cap in 2011

Panera Bread Company (PNRA) also enjoyed a stellar third quarter, raking in $23 million – a $4 million jump over Q3 2009.

As a result, Bank of America raised its price target on the stock to $100 and shares have rise by 10% over the past month. But the company could easily rise much higher, due to two key features…

  • Catering: Since 2003, Panera has offered a regional catering service, but over the past year, it’s made an aggressive push into the national market – a market that brings in $6 billion annually. If the company builds up its share, its current market cap of $2.9 billion could more than double.
  • “My Panera”: The company recently launched its “My Panera” rewards program. It provides complimentary baked goods and gifts to registered members, based on how often they visit their local store. The company expects the program to drive more traffic and help contribute 20% earnings growth over the coming year.
In the end, Panera and Starbucks both came out of the recession not only stronger, but wiser, too. And their efforts over the past year have set a solid foundation for the future.

So with the global economic recovery now afoot, and the markets in a pronounced uptrend, shares of these companies could easily bounce 20% higher by the end of the first quarter.

Good investing,

Alexander Moschina

http://www.investmentu.com/

About the author:

INVESTMENTU
Saj Karsan founded an investment and research firm that is based on the principles of value investing. He has an MBA from the Richard Ivey School of Business, and an undergraduate engineering degree from McGill University.

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