Green Mountain Beats, Ups View
Coffee maker Green Mountain Coffee Roasters Inc. (GMCR) delivered robust first quarter 2013 adjusted earnings (excluding amortization of identifiable intangibles and SEC-inquiry related expenses) of 76 cents per share that surpassed the year-ago quarter earnings of 60 cents by 27%. It also beat the Zacks Consensus Estimate of 65 cents by 17% on the back of solid top-line growth and lower interest expense.
Consolidated Revenues and Margins
Green Mountain’s quarterly net sales surged 16% to $1.3 billion, reflecting the success of Keurig Single Cup Brewers, single serve packs (K-cups), and Keurig-related accessories.
On a year-on-year basis, gross profit increased 24.5% to $419.2 million. The reported gross margin went up 224 basis points to 31.3% due to favorable green coffee costs and a decrease in warranty expense and lower sales returns of Keurig Single Cup Brewing Systems.
Net sales of Single Serve Packs increased 21% year over year to $863.7 million, fuelled by a substantial 26 percentage point surge in volume, partially offset by mix and pricing headwinds.
Net sales of Brewers and Accessories went up 14% from the comparable prior-year quarter to $377.3 million. Approximately 4.95 million, brewers were sold during the period(18% higher than the year-ago quarter), out of which 4.6 million Keurig Single Cup Brewers were sold by Green Mountain and the rest by the company’s licensed brewer partners.
Net sales of Other products slipped 12% to $98.1 million due to demand shift from traditional coffee package formats to single serve packs
Guidance
The company has refined its adjusted earnings per share outlook and capital investment for fiscal 2013, but reiterated its net sales growth and free cash flow estimates. Green Mountain expects its adjusted earnings in the range of $2.72 to $2.82 per share, up from the prior guidance range of $2.64 to $2.74 per share.
The company expects net sales growth in the range of 15% to 20% over fiscal 2012. Free cash flow is estimated to be in the range of $100 million to $150 million. Capital expenditure is expected in the range of $350 million to $400 million, higher than the prior estimate of $380 million to $430 million.
Green Mountain also provided its outlook for second quarter 2013. For the second quarter, the company expects adjusted earnings per share in the range of 70 cents – 75 cents and sales growth in the range of 14% to 18%. The guidance reflects the company’s continuous efforts to increase brand investments and product innovations.
The Zacks Consensus Estimates for the second quarter and fiscal 2013 are pegged at 66 cents and $2.55 per share, respectively.
Green Mountain currently carries a Zacks Rank #2 (Buy). We also recommend our equally well rated investments that offer exposure to the attractive food industry. Some such stocks are Core-Mark Holding Company Inc. (CORE), Natural Grocers by Vitamin Cottage Inc. (NGVC) and Vitamin Shoppe Inc. (VSI) that carry a Zacks Rank #2 (Buy).
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