Green Mountain Is No Ordinary Joe
Green Mountain Coffee Roasters (NAS: GMCR) is humbling naysayers, one caffeinated jolt at a time.
The company behind the Keurig single-cup brewers and K-Cup portion packs obliterated analyst expectations for the holiday quarter. Revenue more than doubled to $1.16 billion. A whopping 4.2 million Keurig brewers shipped from Green Mountain and its partners during the quarter. Green Mountain had shipped 6.5 million systems during all of fiscal 2011. K-Cup sales grew even faster, fueled by an 81% spike in unit sales and a 21% pricing increase in response to percolating java costs.
Earnings -- adjusted to back out one-time expenses and a gain on an asset sale -- rose 233% to $0.60 a share. Wall Street was banking on a profit of $0.36 a share on $1.06 billion.
It's a blowout quarter, but hold on to the sugar packets that you were about to crack open and toss up as confetti. Green Mountain is merely reiterating its guidance for the entire fiscal year that ends in September, and its outlook calling for 45% to 50% in top-line growth and no more than $0.65 a share in adjusted earnings for the current quarter falls short of where the pros are perched.
The stock is still rallying despite the mixed message. There were too many cynics proclaiming that the Keurig craze was fading heading into the holidays and this report silences the critics. Remember Stifel Nicolaus' bearish note after uninspiring channel checks in early December? Laugh loud so you can drown out the scrambling shorts.
Green Mountain also revealed that the second generation of its Keurig brewer -- a higher-end appliance with fresh patents -- will actually hit the market before the end of this quarter. Green Mountain also continues to make progress on developing an espresso-based machine that it will introduce in North America through a partnership with Europe's Lavazza. The single-serve espresso appliance will help Green Mountain compete with Sara Lee's (NYS: SLE) Senseo, upstart CBTL, and Kraft's (NYS: KFT) Tassimo.
One can always argue that it isn't necessary, especially the way that Green Mountain has run circles around the larger Sara Lee and Kraft with its limited Keurig brewer. However, the business would likely be incremental.
It's not as if Green Mountain needs new hardware to keep growing briskly. Starbucks (NAS: SBUX) began offering Starbucks K-Cups through retailers in November, and Green Mountain confirms a push at Starbucks stores later this year. The 4.2 million new Keurig brewers that hit the market during the final three months of the year will also result in strong K-Cup sales.
It's easy to dismiss Keurig as a fad or fear that the expiration of its K-Cup patents later this year will send the stock reeling. Betting against Green Mountain was a brilliant call for those who hopped on David Einhorn's bearish thesis last fall. Now that Green Mountain is getting the last laugh on its critics, wagering against the market leader in the booming single-cup brewing market is brazen -- and dumb -- call.
Shares of Green Mountain have popped sixfold since I originally recommended the java heavy to Rule Breakers subscribers three years ago. It's clearly been a big winner for the growth stock newsletter service, but if you want to discover the newsletter service's next rule-breaking multibagger, a free report tells all. Check it out before it's gone.
At the time this article was published The Motley Fool owns shares of Starbucks. Motley Fool newsletter services have recommended buying shares of Starbucks and Green Mountain Coffee Roasters. Motley Fool newsletter services have recommended creating a lurking gator position in Green Mountain Coffee Roasters. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story, except for Green Mountain. Rick is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.
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