Green Mountain Gains After Third-Quarter Profit Rises 30%
Green Mountain Coffee Roasters Inc. (GMCR), maker of Keurig brewers and single-serve pods, gained the most in more than a year after saying third-quarter profit rose 30 percent.
The shares jumped 25 percent to $22.34 at 9:44 a.m. in New York, after climbing as much as 26 percent for the biggest intraday gain since March 2011. The Waterbury, Vermont-based company’s stock declined 60 percent this year through yesterday.
Net income advanced to $73.3 million, or 46 cents a share, from $56.3 million, or 37 cents, a year earlier, the company said yesterday in a statement. Excluding certain items, profit was 52 cents a share. Analysts projected 50 cents, the average of 10 estimates compiled by Bloomberg.
The shares rebounded from a drop yesterday in late trading after the company cut its fiscal 2012 forecast. Green Mountain faces more competition as grocery stores such as Safeway Inc. (SWY) and Kroger Co. (KR) make private-label capsules to fit into Keurig machines. The main patents for K-Cups expire in September.
“We have had some growing pains,” Chief Executive Officer Lawrence Blanford said in a interview yesterday. “But I think we’ve learned from them, and it has helped us get a better handle on our business going forward.”
The company is evaluating whether to license single-serve coffee pods to stores, Blanford said, without providing specifics.
The company said profit excluding some items will be as much as $2.26 a share this fiscal year. That’s less than a previous estimate of as much as $2.50. Analysts estimated $2.39 a share, on average.
In February, Green Mountain introduced the Vue machine, which makes lattes and cappuccinos to help it compete with Nestle SA (NESN)’s Nespresso makers. Starbucks Corp. (SBUX) in March announced it would begin selling its own single-serve beverage maker, the Verismo, in time for the holiday season this year.
Hedge fund manager David Einhorn said in March that the Starbucks Verismo brewer “is part of the competitive onslaught hitting Green Mountain.” When Green Mountain’s main K-Cup patents expire, it may pave the way for private-label and other rivals to enter the single-serve coffee market. Einhorn has also criticized the company for its accounting practices and lack of transparency.
“You don’t know what the market-share pressure is going to be when new products enter,” Jim Sanderson, a Boston-based analyst at Detwiler Fenton & Co., said in an interview. Green Mountain may need to lower prices “more aggressively” to help draw customers from lower-priced competitors, he said.
Green Mountain is the subject of a U.S. Securities and Exchange Commission inquiry, disclosed in September 2010. Two months later, the company restated earnings for years dating back to 2007 because of issues with K-Cup coffee-pod revenue and royalties, according to a statement.
The company is continuing to cooperate with SEC staff, Green Mountain said yesterday in a filing.
In May, Green Mountain removed its founder, Robert P. Stiller, from the chairman role after he improperly sold shares to meet a margin call after using his stake in the company to back personal loans. Michael J. Mardy is serving as the interim chairman.
Revenue increased 21 percent to $869.2 million in the three months ended June 23. Analysts projected $873.3 million, on average.
K-Cup sales rose 31 percent to $638 million in the quarter compared with the year-earlier period. Sales of the pods gained 59 percent in the second quarter.
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