Green Mountain Coffee Roasters – Update / Forecasts

Green Mountain Coffee Roasters

Green Mountain Coffee Roasters (Photo credit: Wikipedia)

Green Mountain (GMCR : NASDAQ : US$25.87)


Shares of Green Mountain Coffee Roasters plunged Thursday after it reported weaker-than-expected Q2
sales, lowering the market’s confidence in management’s ability to forecast its business.

Sales in the quarter come in at $885.1 million while Wall Street was looking for $971.7 million and
forecasts had been  $936.0 million. K-Cup sales grew by 59% in the quarter versus .

Commenting on the quarter :  Growth is still robust, penetration continues to rise and near/intermediate-term revenue and
earnings growth are essentially ensured.

Market share however -  the outlook is far less bright. Many believe management does not understand where the business is going given their inability to forecast sales. Following the Q2 results, management cut its F12 sales growth forecast to a range of 45-50% from 60-65% and its earnings forecast to a range of $2.40-2.50 from $2.55-2.65.

Some are cutting earnings estimates, now seeing F12 earnings of $2.43 per share on revenue of $3.9 billion, down from $2.60 on $4.05 billion. He is also cutting his target price nearly in half as he adjusts his outlook for the stock.

NOTE:

In the wake of the disappointing results/forecast, there will be a significant turnover in ownership and that it could take a few quarters for the stock to return to a more reasonable valuation.

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