GOOG Crushes It But SBUX Shows That Inflation Is Nasty
Google (GOOG/GOOGL) reported 4Q21 earnings after the close Tuesday and they were a thing of beauty. Revenue increased 32% to $75 billion resulting in a 38% increase in diluted EPS to $30.69. GOOG/GOOGL had revenues in excess of $250 billion in 2021 resulting in full year diluted EPS of $112.20. I do not like tech right now but if I had to buy one tech stock it would be GOOG/GOOGL. This company is a juggernaut. The stock is currently up more than 8% in the after hours and approaching all time highs around $3000. This report will likely dictate an up open for tech Wednesday morning.
While GOOG/GOOGL will get all the attention the rest of Tuesday and Wednesday, Starbucks (SBUX) 4Q21 report is worth taking a close look at as well for what it tells us about inflation. Starbucks CEO Kevin Johnson called demand for Starbucks products in the quarter “incredible” and he is right. Global comparable sales were +13% and North America +18%. The problem for SBUX was that inflation ate away their margins. Operating Margin declined 450 basis points compared to 3Q21 to 15.1%. That meant that despite similar revenue in the two quarters, operating income was down $400 million (~25%) in the 4Q compared to the 3Q. That resulted in a 28% decline in Adjusted Diluted EPS to 72 cents from $1.00 a quarter ago. That’s nasty! SBUX shares are currently -5% in the after hours and probing 52 week lows.