On Apr 10, 2013, Zacks Investment Research upgraded Green Mountain Coffee Roasters Inc. (GMCR - Analyst Report) to Zacks Rank #1 (Strong Buy).
With a stellar fiscal 2013-first quarter performance, efficient measures, strategic agreements to drive out competition following the expiry of the K-cup patents and continuous innovations, this coffee maker is an attractive investment opportunity. The stock’s return was 32.2% in the past one year. Green Mountain’s shares hit a new 52-week high of $59.30 on Apr 1.
Why the Upgrade?
Green Mountain has been witnessing rising earnings estimates on the back of strong fiscal 2013 first quarter results and upgraded guidance for fiscal 2013. Moreover, this well-known coffee maker delivered positive earnings surprises in all the last 4 quarters with an average beat of 19.2%. The long-term expected earnings growth rate for this stock is 19.4%.
The coffee maker delivered robust first quarter adjusted earnings (excluding amortization of identifiable intangibles and SEC-inquiry related expenses) of 76 cents per share that surpassed the year-ago quarter earnings of 60 cents by 27%. It also beat the Zacks Consensus Estimate of 65 cents by 17% on the back of solid top-line growth and lower interest expense.
Green Mountain is expected to deliver robust fiscal 2013-second quarter results, scheduled to report on May 8, considering its upbeat first quarter 2013 results, initiatives to rule out competition, new product roll outs, and better visibility for fiscal 2013.
For the second quarter of fiscal 2013, the company expects adjusted earnings per share in the range of 70–75 cents and sales growth in the range of 14% to 18%. The guidance reflects the company’s continuous efforts to increase brand investments and product innovations.
The company is optimistic about fiscal 2013. It raised adjusted earnings outlook to the range of $2.72 to $2.82 per share, up from the prior guidance of $2.64 to $2.74 per share. The company expects net sales growth in the range of 15% to 20% over fiscal 2012.
Over the last 60 days, Zacks Consensus Estimate for fiscal 2013 moved up by one cent to $2.81 per share on the back of an upward estimate revision by one of the ten analysts covering the stock. For fiscal 2014, the Zacks Consensus Estimate moved up by two cents to $3.21 per share on the back of an upward estimate revision by one of the eight analysts covering the stock.
Several positive developments led to the upgrade for this coffee maker. In Mar 2013, the company entered into a strategic partnership with Unilever North America, whereby, the latter will distribute its Lipton tea in K-cups and Vue packs. The pact furthers Green Mountain’s goal of sustaining its dominance in the single-serve brewing market even after the expiration of patents related to its K-cups in Sep 2012.
Green Mountain is focusing on its products and putting its efforts to turn around its business after its K-cup patents expired in Sep 2012. Apart from rolling out new products, the company is upgrading its Keurig brewing system. It launched Keurig Vue 500 in Mar 2013. Apart from V500, the Keurig Vue Brewing System has provided its customers with advanced brewing options in the form of its Vue 700 and Vue 600 machines.