Published November 27, 2012
Green Mountain Coffee Roasters Inc on Tuesday forecast earnings for the current quarter and full year that were much stronger than analysts expected, helped by an expanded lineup of single-serve coffee makers and drinks, sending its shares up 24 percent in after-hours trade.
Green Mountain, which makes the Keurig brewing system and the K-Cups that go with them, is the leader in the small-but-growing U.S. market for single-serve coffee.
The September expiration of certain of its K-Cup patents opened the door for lower-cost rivals that stand to pressure prices overall and margins for Green Mountain, which makes most of its profit from the cups rather than the brewers.
But Chief Executive Lawrence Blanford said on a conference call with analysts that he had not seen any "marketplace dynamics that have caused us to think differently about our outlook for single-serve packs."
Green Mountain, which started as a small Vermont coffee company, is also expanding beyond coffee, introducing fruity "wellness" drinks with nutrients. It is also working to move consumers to its new higher-end Vue system, whose patents are still in effect, and unveiled a single-cup espresso machine with Italy's Luigi Lavazza.
"As we look to the future, we remain committed to bringing fresh ideas to light; pushing forward disruptive technologies; and capturing true innovation," said Blanford, who will soon be succeeded by Brian Kelley from Coca-Cola Co.
Investors have been largely bearish on the stock since last year when influential short-seller David Einhorn cast doubts on Green Mountain's sales figures, growth projects and accounting practices.
It has also had difficulty forecasting demand for its coffee, a U.S. securities probe into its accounting, and the demotion of company founder Robert Stiller after ill-timed stock sales due to margin calls.
With an additional selling week in the quarter to boost results, Green Mountain said net income was $91.9 million, or 58 cents per share, in its fiscal fourth quarter ended on Sept. 29, up from $75.4 million, or 47 cents per share, a year earlier.
Excluding items, earnings were 64 cents per share. On that basis, analysts on average were expecting 48 cents, according to Thomson Reuters I/B/E/S.
Net sales jumped 33 percent to $946.7 million, topping analysts' average estimate of $902.7 million.
Green Mountain raised its forecast for the new fiscal year to a range of $2.64 to $2.74 per share, from a prior view of $2.55 to $2.65 per share. It expects net sales to grow 15 percent to 20 percent for the year.
For the current first quarter Green Mountain forecast earnings of 62 cents to 67 cents per share and net sales growth of 14 percent to 18 percent. The slightly lower sales growth forecast was due to an unusually strong quarter last year.
The first quarter includes the key holiday shopping period, when gifts of coffee makers can turn many people into ongoing Keurig customers.
Analysts on average were expecting earnings of 59 cents for the quarter and $2.51 for the year, according to estimates.
Green Mountain shares jumped 24 percent to $35.81 after hours, from their Nasdaq close on Tuesday at $28.95.