Q1 Preview: Green Mountain Coffee (GMCR) Hopes Short Sellers See Red On Strong K-Cup Sales


Shares of Green Mountain Coffee Roasters (Nasdaq: GMCR) are trading down nearly 0.55 percent Wednesday ahead of the release of its first-quarter results after the closing bell.

The Wall Street quarterly consensus for Green Mountain Coffee is $0.36 per share in earnings on $1.06 billion in sales. During the first quarter of last year, the company reported earnings of $0.18 per share on $575.03 million in total sales. The company's guidance calls for 85-90 percent sales growth.

For the fiscal year 2012, analysts on the Street are currently estimating $2.56 per share in earnings on $4.24 billion in total sales.

The first quarter conference call is scheduled for 5:00 pm ET.

According to data from Bloomberg, shares of Green Mountain Coffee have nine Buy ratings, three Hold ratings and two Sell ratings. The average price target on shares of GMCR is $82 with a range from $52 to $125.

Green Mountain Coffee is considered a battleground stock, with notable hedge fund manager David Einhorn holding a massive short position citing negative cash flows, the high price of K-cups and upcoming patent expiration. On the other side of the trade, longs point to the popularity of the product and expanding reach from partners like Starbucks.

Analyst Comments:

Dougherty & Company have recently conducted an observation of K-Cup inventories at local retail channels. The firm highlights the K-Cups had expiration dates ranging from 12/11 to 9/12. Coffee K-Cups have a 9-month package life.

The firm forecasts earnings of $0.33 per share on $1.073 billion in total sales for the first quarter.

Analyst at Dougherty & Company comments, "While our price target reflects ~25% upside to shares at current levels, we lack conviction and confidence in how and why key areas of risk focus will abate in the near-term. We struggle to understand and articulate certain areas of risk including how inventory positions align with demand planning within the company and by its retail partners. In addition, we are challenged to understand how price, volume, and partnered brands combine to support expected K-Cup revenues in 2012. Finally, large variances in gross margin rates excluding the impact of price increases, coffee cost inflation, and revenue mix shift remain largely unexplained."

Dougherty & Company is reaffirming its Neutral rating and $62 price target on the company going into earnings.

KeyBanc notes the importance of Green Mountain's results as they anticipate share of Starbux (Nasdaq: SBUX), The J.M. Smucker Co. ( SJM ), Haun Celestial Group (Nasdaq: HAIN) and Dunkin' Brands Group (Nasdaq: DNKN) will all react to the news, whether positive or negative.

The firm highlights that data from Study Logic indicates a 104 percent year over year increase in K-Cup volumes for the quarter, topping the 102 percent increase seen last quarter. An analyst at KeyBanc reports, "According to Study Logic data, SBUX had 0.94% share of K-cups in the December quarter while Dunkin Donuts had 1.3% share. Recall that DNKN K-cups were launched in August and received marketing support only in September. SBUX K-cups started to ship in November. Folgers K-cups, which were launched in 4Q10, already have 3.6% share."

For the first quarter, the firm forecasts $0.40 per share in earnings on 81 percent sales growth.

KeyBanc is reiterating its Buy rating and $80 price target on the company going into the release of its first quarter results.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Stocks

Referenced Stocks: DNKN , GMCR , HAIN , SBUX , SJM



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