Green Mountain Earnings Battle Value & Performance (GMCR)

Green Mountain Coffee Roasters, Inc., (NASDAQ: GMCR) has been a stock that nearly defied logic in its meteoric rise.  It has at least defied gravity.  The company has just announced its fiscal 2009 third quarter earnings for the June 27, 2009 quarter.  Net income rose 123% to $14.1 million, or $0.36 EPS.  The Thomson Reuters figures had that consensus as $0.28 EPS.  Revenues were $190.5 million, up from $118.1 million a year ago, but down slightly from the $193.35 million reported just one quarter ago.  Thomson Reuters had estimates listed as $193.99 million, but there were only a handful of estimates and the range was listed as $193 million to $196 million.  If you adjust for the split, the March lows were around $25.00 and the 2008-end prices were under $20.00.  This top-line disappointment along with its guidance and its astronomical performance has reality setting in during the after-hours session.

The company noted that the cost of sales rose to 66.4% of total net sales compared to 64.0% a year ago on significant increase in sales of Keurig At Home Single-Cup brewers.  The company also increased its accounts receivable by 82% from a year ago to $68.5 million, while inventories rose by 64% to $103.2 million. Long-term debt increased to $126.0 million from $118.7 million a year ago.

For 2009, Green Mountain is projecting consolidated net sales growth of 58% to 61%, and it sees GAAP earnings between $1.37 and $1.41 EPS.  That figure includes the pre-tax $17 millio, or $0.27 per diluted share, Kraft patent litigation settlement, and the non-cash amortization expenses related to the identifiable intangibles of $5.3 million or approximately $0.08 per share.  Excluding the Kraft litigation settlement, fully diluted non-GAAP earnings per share in the range of $1.10 to $1.14 per share, up from prior estimates of $0.98 to $1.02 per share.  Thomson Reuters lists consensus estimates for 2009 at $1.03 EPS and $799.55 million in revenues.

For all of 2010, it is targeting total consolidated net sales growth of 45% to 50% with total K-Cup portion packs shipped system-wide by all Keurig licensed roasters to increase in the range of 65% to 70%.  It sees GAAP earnings in a range of $1.70 to $1.80 EPS, including the non-cash amortization expenses related to the identifiable intangibles mentioned above of $5.3 million or approximately $0.08 per share.  Thomson Reuters listed the 2010 consensus as $1.47 EPS and $1.04 billion in revenues.

The good news is that the stock has already come off its lows.  Shares closed down 2.3% at $65.90 today, and the after hours session shows shares now down under 5% at $62.70.  Shares had been down closer to $62.00 about fifteen minutes ago.

JON C. OGG
JULY 29, 2009