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Here Are Wedbush's 'Long-Term Concerns' About Keurig Green Mountain

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Keurig Green Mountain Inc (NASDAQ: GMCR) is scheduled to announce its third-quarter financial results after the market closes next Wednesday. Wedbush analysts Phil Terpolilli and Dominic Ruccella previewed the results, concluding that near-term trends look promising, but long-term concerns are what keep them on the sidelines. They reiterate a Neutral rating and $85.00 price target.

For the third quarter, the firm is anticipating earnings of $0.80 per share on revenue of $1.032 billion. This estimate implies a 20 percent year-over-year decline in earnings, but still stands above the Street’s consensus, which calls for EPS of $0.79 on slightly higher revenue of $1.035 billion, and management’s guidance for EPS of $0.78.

Wedbush is modeling a total brewer sales decline of 23 percent year-over-year (with brewer sales sequentially flat) and a 6 percent total year-over-year increase in K-Cup segment sales.

At the call, the analysts also suggest looking for updated data on the recently launched K200 value-oriented Keurig model, and on full year guidance, which may be modified after the entrance of the new CFO Peter Leemputte.

Short-Term & Long-Term

While Keurig Green Mountain’s short-term prospects look promising, long-term concerns linger. The analysts note that the continued pullback in the stock “looks overdone in light of the improving coffee cost outlook (…) and ongoing adoption (albeit slowing) of single-serve coffee. Coupled with stabilizing Keurig 2.0 volume trends, a new CFO, and potential excitement around the upcoming FY16 and holiday season,” the analysts foresee the shares surging after next week’s results.

Longer term, “concerns around Keurig Kold, operating cost spending, and successful entrance of unlicensed competitors into 2.0,” lead Wedbush to think the company is unlikely to see substantial earnings growth reacceleration. Thus, they believe the current discount to historical averages is justified.

Shares of Keurig Green Mountain were trading down more than 1 percent at $73.97 on Thursday.

Latest Ratings for GMCR

Nov 2015WedbushMaintainsNeutral
Nov 2015OTR GlobalDowngradesMixedNegative
Sep 2015CLSAMaintainsUnderperform

View More Analyst Ratings for GMCR
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Posted-In: Dominic Ruccella keurig Peter Leemputte Phil Terpolilli WedbushAnalyst Color Reiteration Analyst Ratings


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