Green Mountain Coffee Roasters Inc.
) reported robust fourth quarter 2012 results. Adjusted earnings
(excluding amortization identifiable intangibles expense) of 64
cents per share surpassed both the prior-year quarter earnings
and the Zacks Consensus Estimate of 47 cents by 36% on the back
of solid top-line growth, lower tax rate and lower interest
Further, an extra week in the quarter added 7 cents. Earnings
were also well ahead of the management's guidance range of 45 to
Consolidated Revenues and Margins
Green Mountain's quarterly net sales surged 33% to $946.7
million, reflecting the success of Keurig Single Cup Brewers,
single serve packs (K-cups), and Keurig-related accessories.
Strong sales of bagged coffee and the success of the office
coffee services business also contributed to the year-over-year
The additional week added $90 million to the sales in the
fourth quarter. Sales exceeded the Zacks Consensus Estimate of
$902.0 million and also management's expectation of 25% to 30%
Net sales of K-cup packs increased 47% year over year to
$700.2 million, driven largely by volume growth, partially offset
by mix and pricing headwinds. Two of the company's several
patents expired in September, 2012, which negatively impacted
company's K-cup sales, as these patents provide royalty to the
company if any third party sells its K-cups.
Net sales of brewers and accessories went up 30% from the
prior-year quarter to $150.1 million.
On a year-on-year basis, gross profit increased 24.5% to
$316.4 million. However, gross margin contracted 230 basis points
to 33.4% as lower-than-expected production levels resulted in the
under-utilization of current manufacturing base. Adjusted
operating margin decreased 10 basis points to 16.6%.
Fiscal 2012 Results
Green Mountain's fiscal 2012 adjusted earnings were $2.40 per
share, up 46% from $1.64 per share in the year-ago period. Fiscal
2012 earnings beat the Zacks Consensus Estimate of $2.24 per
share by 7.1%. The upswing in the results was driven by robust
revenue growth. The results exceeded management's earnings
expectation range of $2.21 to $2.26 per share.
Net sales surged 46% to $3.86 billion, reflecting the success
of Keurig Single Cup Brewers, single serve packs, and
Keurig-related accessories. Sales of bagged coffee and office
coffee services business also contributed to the top line. Sales
exceeded the Zacks Consensus Estimate of $3.81 billion and
management's expectation of a sales growth of 43% to 45% over
The company has refined its adjusted earnings per share
outlook for fiscal 2013, but reiterated its net sales growth,
capital expenditures and free cash flow estimates. Green Mountain
expects its adjusted earnings in the range of $2.64 to $2.74 per
share, from the prior guidance range of $2.55 to $2.65 per
The company expects net sales growth in the range of 15% to
20% over fiscal 2012. Capital expenditure is expected in the
range of $380 million to $430 million and free cash flow in the
range of $100 million to $150 million.
Green Mountain also provided its outlook for first quarter
2013. For the first quarter, the company expects adjusted
earnings per share in the range of 62 cents-67 cents and sales
growth in the range of 14% to 18%. The guidance incorporates
company's continuous efforts to increase brand investments and
The Zacks Consensus Estimates for the first quarter and fiscal
2013 are pegged at 68 cents and $2.68 per share,
We provide a long-term Neutral recommendation on the stock, as
we are encouraged by the company's efforts to turnaround its
business. Apart from rolling out new products, Green Mountain,
which specializes in single cup brewing technology, is upgrading
its Keurig brewing system to attract more customers.
Still, Green Mountain carries a Zacks #4 Rank (short term Sell
rating) in the face of increasing competition from new entrants
GREEN MTN COFFE (GMCR): Free Stock Analysis
STARBUCKS CORP (SBUX): Free Stock Analysis
To read this article on Zacks.com click here.