Ahead of the Bell: Starbucks shares perk up

NEW YORK (AP) — Shares of Starbucks Corp. perked up in premarket trading Friday after the chain said its fourth-quarter profit climbed and it lifted its fiscal 2010 adjusted earnings guidance due to improving traffic in its stores.

Late Thursday the company based in Seattle said customers increased their spending and more people visited its coffee shops in the fourth quarter, although there were fewer locations to frequent. The chain's cost-cutting measures were credited with giving its earnings a boost, as the company spent the year slashing expenses, laying off workers and reinventing the food it sells.

Starbucks adjusted profit of 24 cents per share beat the 21-cents-per share estimate of analysts polled by Thomson Reuters. Analysts' estimates typically exclude one-time items.

Jefferies&Co.'s Jeff Farmer said in a client note that the quarterly results also topped his earnings forecast of 22 cents per share. The analyst said Starbucks' cost-cutting efforts have been better than expected, as it finished 2009 with $580 million in cost savings compared with a prior forecast for savings of $400 million.

Farmer increased his price target on the shares to $22 from $21 and reaffirmed a "Hold" rating.

Starbucks also raised its adjusted profit outlook for next year. It now expects earnings per share excluding one-time items to climb between 15 percent and 20 percent. The company previously expected earnings per share to grow 13 percent to 18 percent.

Marc Greenberg of Deutsche Bank North America views the 2010 outlook as "somewhat conservative," assuming sales at stores open at least a year do not slow down. He maintained a "Hold" rating and raised Starbucks' price target to $18 from $14.

The company's stock climbed 90 cents, or 4.6 percent, to $20.60 in premarket trading. The shares closed at $19.70 on Thursday.