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Keurig Plunges to 52-Week Low on Disappointing Q2 Results - Analyst Blog

Zacks Equity Research

Shares of Keurig Green Mountain Inc. GMCR hit a new 52-week low of $92.05 on May 7 plunging roughly 25.86% year-to-date.

Factors Hurting Keurig Green Mountain

The Keurig K-Cup owner reported disappointing second-quarter fiscal 2015 results and missed both earnings and sales estimate. The company even lowered the sales outlook for the fiscal year following the lower than expected second quarter results.

Adjusted earnings of $1.03 per share missed the Zacks Consensus Estimate of $1.05 by 1.9%. Earnings also declined 5% from the year-ago quarter due to soft revenues and lower margins.

Earnings were negatively impacted by an 8-cent per share dilution from the Coca-Cola and Lavazza equity transactions as well as a 5-cent per share negative impact from foreign currency exchange.

Although net sales increased 2% year over year to $1.13 billion, it missed the Zacks Consensus Estimate of $1.16 billion by 2.6%. Gross margin shrank 80 basis points (bps) to 40.7% of net sales as higher price realization on portion packs was offset by negative pricing of brewers.

The company is also not optimistic for the rest of the fiscal year 2015. It lowered the fiscal 2015 outlook to reflect the impact of product transition from its traditional brewers to the new Keurig 2.0 brewers and the soft results for the second quarter.

The company expects adjusted earnings per share to decline in mid single-digits including a foreign exchange headwind of 14 cents. Keurig Green Mountain expects revenues to remain flat or grow in low single-digits in versus high-single to low-double digit increase expected previously.

Keurig Green Mountain currently carries a Zacks Rank #3 (Hold).

Stocks to Consider

Some better-ranked stocks in the consumer staples sector are Dr Pepper Snapple Group Inc. DPS and Monster Beverages Corp. MNST both carrying a Zacks Rank #2 (Buy). Another consumer staple stock SUPERVALU Inc. SVU carrying the same Zacks Rank as Dr Pepper is also worth a look.


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