Why Keurig Green Mountain Earnings Are Not Enough

Companies and Brands

Published: February 4, 2015 4:34 pm

Last Updated: April 28, 2020 10:20 am

Keurig Green Mountain Inc. (NASDAQ: GMCR) reported its fiscal first-quarter results Wednesday after the markets closed as $0.88 in earnings per share (EPS) on $1.39 billion in revenue, against Thomson Reuters consensus estimates of $0.89 in EPS and $1.47 billion in revenue. The same period last year had $0.96 in EPS and $1.39 billion in revenue.

The company gave guidance for the second quarter as EPS in a range of $1.00 to $1.05 and net sales growth in the mid-single digits from the same period in the previous year. There are consensus estimates of $1.18 in EPS and $1.23 billion in revenue.

The net sales per segment were $1.01 billion for Portion Packs and $308 million for Brewers and accessories. The Portion pack segment grew 9% from the fourth quarter in 2013. Brewers and accessories decreased 18% year-over-year.

The board of directors declared a regular quarterly dividend of $0.2875 per share for all common stock. The quarterly cash dividend will be paid on April 30, 2015.

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During the first quarter, Keurig repurchased a total of 586,000 shares at a cost of $81 million. Under the current share repurchase plan, the company has repurchased a total of 17.5 million shares at an average price of $67.94 per share for a total cost of $1.2 billion.

President and CEO Brian Kelley said:

Keurig is pleased to deliver earnings per share in line with our outlook. Revenue came in below our expectations primarily due to a weaker than expected holiday season for brewers, including the effect of the voluntary recall on certain MINI Plus brewers, and greater than expected retailer portion pack inventory reductions. We believe these factors are transitory and, while the impact to the holiday season for our hot platform was disappointing, we remain very enthusiastic about our opportunity to grow and premiumize at-home beverages across both our hot and cold platforms.

In January, Credit Agricole initiated coverage of Keurig with an Underperform rating and a price target of $130. Zacks reiterated a Neutral rating with a $134 price target.

Shares of Keurig closed Wednesday down 4% at $121.20. In after-hours trading shares were down another 6% to $113.68 following the earnings report. The company suffered a similar drop following the previous earnings report. The stock has a consensus analyst price target of $148.23 and a 52-week trading range of $80.30 to $158.87. The market cap is nearly $20 billion.

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