Green Mountain Gains After Raising Forecast on K-Cups
Green Mountain Coffee Roasters Inc. (GMCR), the maker of Keurig single-serve brewers, rose to the highest price in more than a year after boosting its profit forecast on higher K-Cup sales and announcing an expanded partnership with Starbucks Corp.
The shares climbed 18 percent to $70.01 at 9:54 a.m. in New York after surging to $70.98, the highest intraday price since Feb. 21, 2012. Waterbury, Vermont-based Green Mountain has gained 44 percent this year through yesterday, while the Russell 1000 Index has advanced 15 percent.
Profit excluding certain items in the year ending in September will be as much as $3.15 a share, up from a previous forecast for a maximum of $2.82, Green Mountain said in a statement yesterday. Analysts, on average, projected $2.85. Starbucks also announced yesterday it will add K-Cup brands including Seattle’s Best Coffee in a five-year agreement with Green Mountain.
Chief Executive Officer Brian Kelley, who took the helm in December, has tried to lure consumers with different flavored drink pods for the company’s Keurig brewers. Green Mountain later this year will begin selling Lipton iced and hot tea K-Cups and Vue packs. The company also recently began selling antioxidant and vitamin-enhanced single-serve pods.
“K-Cups resonate well with consumers,” Marc Riddick, an analyst at Williams Capital Group in New York who rates the shares the equivalent of buy, said in an interview. “The product that resonates with customers is ultimately what wins.”
Single-serve cup sales 21 percent to $794 million in the second quarter.
Starbucks, the world’s largest coffee-shop operator, also will add Teavana tea and cocoa to its K-Cup portfolio, the Seattle-based company said in a statement.
The pact is a “symbiotic relationship” for the two companies, Riddick said. With single serve, “the market opportunity is so great because most of us are drinking more coffee than we did five years ago,” he said.
Green Mountain also sells Dunkin’ Brands Group Inc. (DNKN)’s Dunkin’ Donuts brand K-Cups, as well as Gloria Jean’s and Caribou Coffee single-serve coffee packs. The Keurig maker first reached an accord with Starbucks in March 2011 to sell pods.
“This long-term partnership is a big win for our shareholders, customers and consumers,” Kelley said during an earnings call. The contract may be renewed for another five years “upon achieving mutually agreed upon volumes,” he said.
Starbucks stores will sell Keurig brewers and the two companies have identified about a dozen international markets to expand to with Keurig machines and K-Cups, Kelley said during an interview.
Green Mountain’s second-quarter net income rose 42 percent to $132.4 million, or 87 cents a share, from $93 million, or 58 cents, last year. Excluding certain items, profit was 93 cents a share. Analysts projected 73 cents, the average of 12 estimates compiled by Bloomberg.
Sales of Green Mountain brewers and accessories dropped 9.6 percent to $126.8 million in the second quarter. The company is trying to combat rivals in the U.S. with new coffee machines -- including the Vue and Rivo brewers. The Keurig Rivo R500 espresso maker is $315 on the Bloomingdale’s website, while Starbucks Corp. (SBUX)’s Verismo V585 machine is $299 on its website.
Total revenue rose 14 percent to $1 billion in the quarter. Analysts estimated $1.02 billion, on average.
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