Keurig Green Mountain Inc. (NASDAQ: GMCR) reported second-quarter fiscal 2015 earnings after markets closed Wednesday. The maker of the Keurig single-cup brewing system posted adjusted diluted earnings per share (EPS) of $1.03 on revenues of $1.13 billion. In the same period a year ago, the company reported EPS of $1.08 on revenues of $1.1 billion. Second-quarter results also compare to the Thomson Reuters consensus estimates for EPS of $1.05 and $1.15 billion in revenues.

Top-line growth was lower than expected due to the slower-than-expected transition to the Keurig 2.0 hot beverage system. The company said it is taking action to reduce inventories on the new machines and stepping up its marketing. This is something we noted in our preview that might happen.

Sales of brewing machines fell 23% year-over-year while pod sales rose 7%. Net sales rose $24 million, or 2% year-over-year. Gross margins declined to 40.7%, down 80 basis points.

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The company’s CEO said:

Although we are lowering our guidance to reflect the impact of near-term challenges related to this complex product transition, we remain highly confident in our long term strategy for the Keurig hot system and continue to believe there is a significant runway of opportunity. Combined with the upcoming launch of our Keurig KOLD system, we expect the Keurig brand to further expand and globalize while continuing to transform the premium home beverage experience for consumers.

About that guidance: Keurig now estimates sales growth for the fiscal year will be flat to up by low single digits compared with fiscal year 2014. Adjusted EPS is now forecast to drop in the mid-single digits, including a $0.14 per share headwind from currency exchange effects. The EPS estimate does not include amortization or legal expenses. Full-year free cash flow is now estimated in a range of $120 million to $170 million and capex is expected to range between $425 million and $475 million. Analysts are looking for full-year EPS of $4.10 on revenues of $4.99 billion.

For the third quarter, net sales are forecast up by the low single digits year-over-year and adjusted EPS is forecast up $0.75 to $0.80. Consensus estimates call for EPS of $1.08 on revenues of $1.12 billion. Keurig has forecast a clean miss.

Shares were battered in after-hours trading Wednesday, down about 10% at $108.08, in a 52-week range of $109.44 to $158.87. The consensus price target on the stock is $139.50 and the high target is $175.00.

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