Green Mountain Issues Solid Q2 Figures, Guidance Seems Light

On Wednesday, May 7, 2014, Keurig Green Mountain Inc.

reported its fiscal second-quarter earnings, beating analyst's estimates on both the top- and bottom-line figures. Although the company reduced the fiscal year outlook and gave third-quarter guidance which was at the low end of the Street's estimate ranges, shares of Green Mountain are up 6.30 percent, or $5.81 per share, to $98.02 in the post-market session. The company reported quarterly net income of $260 million, or $1.03 per share, representing an increase of about $48 million, or 23 percent, from the same quarter last year. On an adjusted basis, Green Mountain reported earnings of $1.08 per share, beating the analyst estimate of $0.98. Green Mountain posted sales of $1.103 billion, up 10 percent on a year-over-year basis. Analysts on Green Mountain were expecting sales around $1.05 billion. "Double digit sales and earnings growth on the heels of a strong holiday season demonstrates the continued opportunity to grow our Keurig system in North America in a very competitive environment," said Brian Kelley, Keurig's President and CEO. "During the quarter, we drove strong brewer and portion pack net sales and accelerated our installed base. In addition, disciplined cost controls drove operating profit and margin growth that translated into solid earnings and a significant increase in free cash flow. "At the end of the quarter, our balance sheet was very strong, with $1.1 billion in cash, even after we returned nearly $800 million of cash to shareholders in the quarter in the form of dividends and share repurchases, including purchases made through an accelerated stock repurchase agreement," continued Kelley. "We are very pleased with our performance and continue to be optimistic about the momentum in our business and the opportunities in front of us."

As for guidance, the company expects third-quarter sales to grow in the high single digits on earnings of $0.83-$0.88 per share. Analysts are looking third-quarter EPS around $0.88. Green Mountain reduced its FY14 EPS outlook from $3.75-$3.85 to $3.63-$3.73, compared to the current Street estimate of $3.72. The company's Board authorized a $1 billion share repurchase.