Argus Downgrades Keurig Green Mountain On Multiple Headwinds

In a report published Wednesday, Argus analysts John Staszak downgraded the rating on Keurig Green Mountain Inc (NASDAQ: GMCR) from Buy to Hold, following the company's weak near term outlook.

The company reported weak sales so far in FY15, while recently lowering its full year guidance. "Looking ahead, we expect difficulties with the Keurig 2.0 brewer to hurt sales of beverage pods, and look for the company to face pressure from price cuts on the pods that it manufactures for Starbucks Corporation (NASDAQ: SBUX) and Kraft Foods Group, Inc. (NASDAQ: KRFT)," the analyst said.

The analyst also expects near-term earnings to be impacted by increased coffee costs, expenses related to the new KOLD brewing system and the Keurig 2.0 markdowns. The analysts has accordingly lowered the FY15 and FY16 EPS estimates from $4.32 to $3.90 and from $4.95 to $4.40, respectively.

The analyst, however, expressed his optimism regarding "the company's distribution agreements with beverage companies to add brands to its K-cup line, and management's ongoing efforts to cut costs."