Can Keurig Green (GMCR) Keep its Earnings Streak Alive? - Analyst Blog

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Keurig Green Mountain Inc. ( GMCR ) is set to report the fourth-quarter and full-year fiscal 2014 results on Nov 19. Last quarter, the company delivered a positive surprise of 13.8%. Let us see how things are shaping up for this announcement.

Factors to Consider

Keurig Green Mountain has been posting better-than-expected results in the trailing four quarters, with an average earnings surprise of 13.9%, backed by solid top-line improvement and enhanced operational efficiencies.

Moreover, the coffee maker entered into several strategic during the fourth quarter alliances to maintain its leading position in the single-serve brewing category. During the fourth quarter, the company signed distribution agreements with popular coffee makers like Shazam Coffee and Kraft Foods Group Inc. ( KRFT ) to include their popular coffee brands in K-Cup packs that can be used on Keurig brewers. These should boost revenues in the fourth quarter.

However, the company has been suffering from margin weakness in the portion pack category for the past few months. Additionally, higher coffee costs have prompted it to raise the prices which can hurt volumes. Again, increased investment in the newly launched Keurig 2.0 brewer is also expected to pressurize fourth-quarter margins amid aggravating input prices.

Earnings Whispers?

Our proven model does not conclusively show that Keurig Green Mountain is likely to beat earnings this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 to surpass earnings estimates. However, that is not the case here due to the following factors:

Zacks ESP: ESP for Keurig Green is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 78 cents.

Zacks Rank: Keurig Green has a Zacks Rank #2 (Buy), which when combined with a 0.00% ESP makes surprise prediction difficult.

We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks to Consider

Here are some companies that investors may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Best Buy Inc. ( BBY ), with an Earnings ESP of +4.17% and a Zacks Rank #1 (Strong Buy).

The Kroger Co. ( KR ), with an Earnings ESP of +3.28% and a Zacks Rank #2.

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BEST BUY (BBY): Free Stock Analysis Report

KEURIG GREEN MT (GMCR): Free Stock Analysis Report

KRAFT FOODS GRP (KRFT): Free Stock Analysis Report

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

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

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