Which Top Beverage Stocks have the Strongest Earnings Trends After Starbucks Earnings?

Earnings trends are extremely important when evaluating stocks. At Wall St. Cheat Sheet, we view increasing earnings quarter-over-quarter as a simple way to gauge whether costs and the business model are stable. Then we like to analyze whether the company is outperforming peers in the sector. This is what we call the “E-Squared” investment analysis (‘E = Earnings Are Increasing Quarter-Over-Quarter’ + ‘E = Excellent Relative Performance Versus Peers and Sector’).

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Here’s your Cheat Sheet to how the top 5 beverage stocks rank via earnings trends:

Starbucks Corp. (NASDAQ:SBUX): Current Price $56.81

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 10,380 9,775 10,710 11,700 13,300
Diluted EPS ($) 0.43 0.52 1.24 1.62 1.86

Starbucks has been on a tear since 2009, delivering sharply better revenue and EPS performance each year after 2009.

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2011
Revenue ($) in millions 3,436 3,196 3,304 3,364 3,800
Diluted EPS ($) 0.50 0.40 0.43 0.46 0.57

Quarterly revenue growth tapered off a bit until this week’s earnings release. Regardless, the company has grown earnings and revenues each of the last three quarters. This is one strong candidate…

The Coca-Cola (NYSE:KO): Current Price $37.05

Fiscal Year 2007 2008 2009 2010 2011
Revenue ($) in millions 28,860 31,940 30,990 35,120 46,540
Diluted EPS ($) 1.285 1.245 1.465 2.53 1.845

The revenue growth after 2008 tells us why the stock is a Buffett favorite. ¬†EPS was also growing nicely till 2010, but seems to have hit a roadblock in 2011. We need to analyse this a bit more…

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Sep. 30, 2011 Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012
Revenue ($) in millions 12,250 11,040 11,140 13,080 12,340
Diluted EPS ($) 0.48 0.35 0.44 0.60 0.50

Sales and profits grew at a decent clip between December 2011 and June 2012. Unfortunately, Coke delivered a rather indifferent performance in September 2012, with both revenue and EPS coming off sharply. Let’s look at more companies…

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Pepsico, Inc. (NYSE:PEP): Current Price $72.49

Fiscal Year 2007 2008 2009 2010 2011
Revenue ($) in millions 39,470 43,250 43,230 57,840 66,500
Diluted EPS ($) 3.41 3.21 3.77 3.91 4.03

This is an impressive performance from PepsiCo. Sales have grown at a torrid pace in 2010 and 2011, and EPS is up every year after 2008.

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Sep. 30, 2011 Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012
Revenue ($) in millions 17,580 20,160 12,430 16,460 16,650
Diluted EPS ($) 1.25 0.90 0.71 0.94 1.21

It looks like Pepsi would like to forget the March 2012 quarter, but it certainly bounced back in the next two quarters, growing both revenue and EPS decently. This beverage stock certainly holds our attention…

Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR): Current Price $46.31

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 492.52 786.14 1,357 2,651 3,859
Diluted EPS ($) 0.19 0.45 0.58 1.31 2.28

Green Mountain Coffee Roasters’ revenue in 2012 is almost eight times that of 2008, while EPS has grown 12 times in that same period. Wow!

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Sep. 30, 2011 Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012
Revenue ($) in millions 711.88 1,158 885.05 869.19 946.74
Diluted EPS ($) 0.48 0.66 0.58 0.46 0.58

Unfortunately, the last five quarters have been somewhat erratic, with sales and EPS doing a worrisome yo-yo. However, the September 2012 quarter does seem to have gone much better for the company. Let’s see if we have a better stock in the sector…

Dunkin’ Brands Group Inc (NASDAQ:DNKN): Current Price $36.85

Fiscal Year 2009 2010 2011
Revenue ($) in millions 538.07 577.14 628.20
Diluted EPS ($) 0.55 0.42 0.35

Sales are going north at Dunkin’, but EPS is headed in an entirely different direction. Some pressure on profit margins is eating into shareholder value.

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Sep. 30, 2011 Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012
Revenue ($) in millions 163.51 168.50 152.37 172.39 171.72
Diluted EPS ($) 0.06 0.05 0.21 0.15 0.26

With the quarterly results, Dunkin’ has not been very consistent. However, profits grew compared to the previous period in two out of five quarters examined.

Conclusion

In this “E-Squared” investment analysis of beverage stocks, Pepsico is the company of choice because it reported a rising EPS in its last two quarters, in tune with a solid annual performance. Although, Starbucks is worth adding to your watch list too.

“E = Earnings Are Increasing Quarter-Over-Quarter” is a core component of our successful CHEAT SHEET investing framework. Don’t waste another minute – click here to discover our CHEAT SHEET stock picks now!