Specialty coffee retailer
Green Mountain Coffee Roasters Inc.
), delivered robust first-quarter 2014 adjusted earnings of 96
cents per share which beat the Zacks Consensus Estimate of 89
cents by 7.8% and surpassed the company's guidance of 85 cents-90
Earnings also surpassed the year ago quarter results by 26%.
Adjusted earnings excluded amortization of identifiable
intangibles and SEC-inquiry related expensesy 26%.
Profit was on the upswing on the back of solid top-line
improvement and enhanced operational efficiencies.
Consolidated Revenues and Margins
Green Mountain's quarterly net sales rose 4.0% to $1.4 billion
from $1.3 billion in the comparable prior-year quarter, backed by
8% growth in the sales of K-cups and Vue packs.
Approximately 94% of fourth-quarter fiscal 2013 net sales was
contributed by the sales of Keurig Single Cup Brewers, portion
packs and Keurig-related accessories, with the remainder coming
from bagged coffee, fractional packs and the Canadian office
coffee services business.
Net sales of
Single Serve Packs
increased 8.0% year over year to $931.4 million due to a
substantial 12 percentage points surge in volume, partially
offset by mix and pricing headwinds.
Net sales of
Brewers and Accessories
slipped 1.0% from the comparable prior-year quarter to $375.1
million mainly due to unfavorable product mix and price
realization and decline in accessory net sales.
Net sales of
products slipped 18% to $80.2 million due to a demand shift from
traditional coffee package formats to single-serve packs, mainly
Green Mountain reported record sales of brewers and packs in
spite of a challenging retail environment where holiday sales
were disappointing for many retailers.
Gross profit went up 11% to $464.0 million backed by higher
revenues. Gross margin inflated 220 basis points (bps) to 33.5%
due to favorable green coffee costs and strong revenue.
Adjusted operating income went up 22% to $238.2 million.
Adjusted operating margin inflated 270 bps to 17.2% backed by
favorable green coffee costs and positive pricing
Global Strategic Partnership with Coca Cola
Green Mountain entered into a 10-year partnership with
beverage giant The
Coca Cola Company
) which will allow consumers to make its sodas and other drinks
at home. Also, Coca-Cola is taking a 10% stake in Green Mountain
for about $1.25 billion. The news drove Green Mountain's share
price significantly higher in after-market trading.
Under the deal, Green Mountain will exclusively make Coca-Cola
branded pods for use on its upcoming Keurig Cold at-home beverage
system that will make cold beverages. Coca-Cola will also work
with Green Mountain on the development and launch of this latest
version of Keurig single-cup brewer.
Green Mountain will also enjoy the sole right to sell
and distribute Coca-Cola Company-branded single-serve, pod-based
As part of the deal, Coca Cola will buy almost 16.6 million
shares of Green Mountain for a total cost of $1.25 million,
representing 10% minority stake in the company.
Other Financial Details
During the quarter, Green Mountain repurchased 10.5 million
shares at a total cost of $387 million.
Guidance for Fiscal 2014
Green Mountain reaffirmed its sales guidance for the
underlying business but raised its sales outlook for the fiscal
2014 to reflect the benefits from the partnership with Coca
The company reaffirmed its adjusted earnings per share
guidance in a range of $3.75 to $3.85. Sales are expected to grow
in high single-digit range from 2013 levels better than
prior expectation of a mid single-digit range. Free cash
flow is estimated in the range of $200-$300 million.
Guidance for Q2 Fiscal 2014
Green Mountain also provided its outlook for second-quarter
2014. The company expects adjusted earnings per share in the
range of 93 cents-98 cents and sales growth in the range of
low-to-mid single digit. The guidance reflects the company's
continuous efforts to increase brand investments and product
GMCR aims to achieve double-digit growth in annual revenues
and annual earnings growth in the mid-teens over the long
The Zacks Consensus Estimate for first-quarter and fiscal 2014
earnings are pegged at $1.05 and $3.84 per share,
Other Stocks to Consider
GreenMountaincurrently carries a Zacks Rank #1 (Strong Buy).
Other consumer staples stocks worth considering are
Tyson Foods Inc.
Constellation Brands Inc.
The Hain Celestial Group Inc.
). All these stocks carry the same Zacks Rank as Green
GREEN MTN COFFE (GMCR): Free Stock Analysis
HAIN CELESTIAL (HAIN): Free Stock Analysis
COCA COLA CO (KO): Free Stock Analysis Report
CONSTELLATN BRD (STZ): Free Stock Analysis
TYSON FOODS A (TSN): Free Stock Analysis
To read this article on Zacks.com click here.