Green Mountain Coffee Roasters Inc.
) reported robust third quarter 2012 results. Adjusted earnings
(excluding amortization identifiable intangibles expense) of 52
cents per share climbed 6% from 49 cents reported in the prior-year
quarter and also surpassed the Zacks Consensus Estimate of 49 cents
The year-on-year upswing came on the back of lower coffee prices
coupled with net price realization that in turn was a result of the
positive pricing undertaken in the previous year.
Consolidated Revenues and Margins
Green Mountain's quarterly net sales surged 21% to $869.2
million from $717.2 million in the prior-year period, reflecting
the success of KeurigSingle Cup Brewers, single serve packs, and
Keurig-related accessories. Strong sales of bagged coffee and
success of office coffee services business also contributed a large
deal. However, sales missed the Zacks Consensus estimate of $875.0
Net sales of single-serve pack increased 31% year over year to
$638.0 million, driven by the 28 percentage points increase
in sales volume and 3 percentage-point increase in K-Cup pack net
Net sales of brewers and accessories went up 32% from the
prior-year quarter to $139.1 million.
According to the market research firm NPD, Vue brewer sales were
more than double of other coffee and espresso makers' sales during
On a year-on-year basis, gross profit increased to $303.3
million from $264.1 million in the year-ago quarter. Gross margin
was 34.9% of net sales as against 36.8% in the third quarter of
2011. Gross margin contracted as lower-than-expected production
levels led to the under-utilization of current manufacturing
Operating income climbed 9.3% to $144.2 million during the third
quarter. Operating margin was 16.6% compared with 18.4% in the
Other Financial Updates
Exiting the quarter, Green Mountain had cash and cash
equivalents of $149.1 million, compared with $146.0 million in the
Inventories stood at $667.0 million compared with $602.1 million
in the prior quarter. Accounts receivable reduced to $265.9 million
during the third quarter, from $300.7 million in the prior quarter.
Debt outstanding came down to $409.1 million from $441.2 million in
the prior quarter.
Following the third-quarter results, Green Mountain lowered its
guidance and now projects fourth quarter 2012 adjusted earnings per
share in the range of 45 cents-50 cents. Fiscal 2012 adjusted
earnings are expected between $2.21 and $2.26 per share. The Zacks
Consensus Estimates for the fourth quarter and fiscal 2012 are
pegged at 62 cents and $2.37 per share, respectively.
Green Mountain forecasts net sales growth of 25%-30% for the
fourth quarter. Additionally, the company plans to achieve
consolidated net sales growth of 43%-45% (over fiscal 2011) and
expects net sales to be in the range of $3.79 billion-$3.84 billion
for fiscal 2012.
Capital expenditures are expected to be within $475.0
million-$525.0 million for fiscal 2012.
Green Mountain, unlike its coffee producing peers, has
diversified its business and is a complete unit of coffee making as
well as brewing.
However, Green Mountain's revenue is highly dependant on its
Keurig business. The main patents on the K-Cup will end in
September 2012. Well known brands and close competitors like
) and Caribou Coffee Roasters will have other alternatives, which
will hurt Green Mountain's fundamentals.
Currently, Green Mountain carries a Zacks #4 Rank (short-term
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