Keurig Green Mountain Surges After Earnings Beat And Announcement
Keurig Green Mountain (NASDAQ: GMCR), formally known as Green Mountain Coffee, on Wednesday reported very strong second quarter results.
Keurig Green Mountain earned $1.08 per share, beating the consensus estimate of $0.95. Revenue grew 10 percent year-over-year to $1.1 billion, coming in $50 million more than analysts expected.
Net income attributable to the company rose to $162.1 million from $132.4 million in the same quarter a year ago, as sales of single-serve K-cups rose 13 percent to $898 million, while sales of Keurig brewing machines and accessories rose nine percent to $137.6 million.
Keurig ended the quarter with $1.1 billion in cash, even after returning nearly $800 million to shareholders in the form of dividends and share repurchases in the quarter.
Keurig also announced that it will expand its relationship with J.M. Smucker (NYSE: SJM) to make and sell Folgers, Millstone and other brands in formats that will work with the new Keurig brewing system.
Finally, Keurig authorized a new share repurchase program of up to $1 billion that expires in two years.
“We are very pleased with our performance and continue to be optimistic about the momentum in the business and the opportunities in front of us,” said Brian Kelley, Keurig's President and CEO in a press release.
Bank Of America: Solid Quarter
Bryan Spillane of Bank of America in a note to clients on Thursday explains that Keurig reported a solid quarter and management offered guidance that could confirm continued expansion and stable share trends in the single serve category.
Spillane also notes that the company remains on track to release its Keurig 2.0 system in the fall and management seems “comfortable with progress” on retaining and expanding its portfolio of partners such as Smuckers.
Additionally, Spillane notes that Keurig is on track for a 2015 release of its Keurig Cold system as the company is building manufacturing capacity in the southeastern U.S.
Not all is positive for Spillane, however, as the phasing impact of share repurchases is slower than what he had forecasted due in part to options exercises.
Shares are Neutral rated with a $122 price target.
S&P Capital IQ: Solid Growth Ahead For The Company, Not So Much For Shares
Joseph Agnese of S&P Capital IQ sees plenty of optimism for Keurig to grow over the coming year with the Keurig 2.0 brewer system debuting in the second half of 2014 and Keurig Cold to debut later in 2015.
According to Agnese, Keurig's strategy will involve converting unlicensed single serve producers to partner with the company, as unlicensed pods will not function in the new Keurig 2.0 machine.
“We expect that Keurig 2.0 will use only owned or licensed portion packs, giving Keurig additional protection against unlicensed portion pack producers, which have been gaining market share with Keurig's current primary Keurig coffee system,” Agnese wrote in a note on Wednesday.
Agense is projecting sales in full year fiscal 2014 to rise only 11.6 percent, compared to a growth of 12.1 percent in fiscal 2013 due to retailers deferring purchases of Keurig machines until Keurig 2.0 is available for sale.
Looking forward, Agense expects Keurig's operating margin to improve in a lower green coffee costs environment and benefits from the recently signed 10-year agreement with Coca-Cola products to be used in the Keurig Cold system.
Nevertheless, shares are Hold rated with a $110 price target.
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