We expect specialty coffee maker
Keurig Green Mountain Inc.
) to beat expectations when it reports third-quarter fiscal 2014
earnings results on Aug 6, after the market closes.
Why a Likely Positive Surprise?
Our proven model shows that Keurig Green Mountain is likely to
beat earnings because it has the right combination of two key
, which represents the difference between the Most Accurate
estimate and the Zacks Consensus Estimate, stands at 2.30%. This is
very meaningful and a leading indicator of a likely positive
earnings surprise for shares.
Keurig Green Mountain currently has a Zacks Rank #3 (Hold). Note
that stocks with Zacks Ranks #1, #2 and #3 have a significantly
higher chance of beating earnings. The Sell-rated stocks (#4 and
#5) should never be considered going into an earnings
The combination of Keurig Green Mountain's Zacks Rank #3 and
+2.30% ESP makes us very confident in looking for a positive
What's Driving the Better-than-Expected
Keurig Green Mountain has been posting better-than-expected
results in the trailing four quarters, with an average surprise of
11.74%, on the back of solid top-line improvement and enhanced
operational efficiencies. This earnings streak is expected to
continue in the third quarter as well.
Moreover, Keurig Green Mountain entered into several strategic
alliances which should help it maintain a leading position in the
single-serve brewing category. During the second quarter, Keurig
entered into distribution agreements with popular coffeemakers like
Nestle and Italy's Lugi Lavazza to offer their popular coffee
brands K-Cup packs that can be used on Keurig brewers.
These deals have enabled Keurig Green Mountain to align with
major beverage brands to support a range of consumer choices and
taste profiles under the Keurig Single-Cup Brewing system.
Moreover, these alliances are expected to boost the company's top
line in the upcoming quarter.
In Jun 2014, Keurig Green Mountain entered into a distribution
deal with Subway restaurants, which is also expected to boost
sales. Per the agreement, the coffee maker's new K150 brewer series
will be installed at Subway restaurants across the U.S. thereby
widening the homemade single-serve coffee options for Keurig
Sales are expected to further improve in the fourth quarter as
the company is foraying into the world of cold beverage and soda
with the launch of The Keurig Cold Machine scheduled in late 2014.
In order to increase the brand power of the new machine, Keurig
Green Mountain inked a 10-year partnership deal, in Feb 2014, with
beverage giant, The Coca Cola Company (
). Per the deal, Keurig Green Mountain will exclusively make
Coca-Cola branded pods for the cold beverage system.
Other Stocks to Consider
Other food/beverage stocks that have both a positive Earnings
ESP and a favorable Zacks Rank include:
Supervalu Inc. (
), with an Earnings ESP of +9.09% and a Zacks Rank #2 (Buy).
Wal-Mart Stores Inc. (
), with an Earnings ESP of +2.48% and a Zacks Rank #3.
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KEURIG GREEN MT (GMCR): Free Stock Analysis
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COCA COLA CO (KO): Free Stock Analysis Report
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