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Shares of Green Mountain Coffee Roasters (GMCR) hit an all-time high after selling a record 5.1 million Keurig brewers last quarter. Then, Coca-Cola (KO) sealed the deal by purchasing a 10% stake in GMCR and agreeing to collaborate on the company’s next big Keurig platform.
Can Green Mountain stock go any higher than here? Time to buy? Find out.
Green Mountain Coffee Roasters offers 30 brands and 250 varieties of coffee, cocoa, and tea. GMCR sells its drinks to wholesale customers like supermarkets and foodservice companies, as well as in ExxonMobil (XOM) convenience stores and McDonalds’ (MCD) restaurants. Green Mountain coffee is sold under the Newman’s Own Organics brand and the Tully’s label, but the biggest money-maker for this firm is its Keurig single-cup brewing systems for office and home use. The company is based in Waterbury, Vermont and it employs nearly 6,000 across North America.
Green Mountain Coffee announced strong fiscal first-quarter operating results after the closing bell on Wednesday. Q1 profit improved 28% year-on-year to $138.2 million, or 91 cents per share. Adjusted earnings were 96 cents per share, trouncing the 90 cents per share consensus EPS estimate by 6.6%.
Meanwhile, sales advanced 4% to $1.39 billion on higher Keurig sales. Analysts had predicted $1.41 billion in sales so Green Mountain Coffee Roasters posted a minor sales miss.
However, Green Mountain shares still skyrocketed after the report because the company’s outlook is so strong. Looking ahead to FY 2014, Green Mountain Coffee Roasters expects net sales growth in high single digits, with particularly strong sales in the second half. Additionally, Green Mountain Coffee Roasters forecasts EPS in the range of $3.75 to $3.85 per share. This range meets the Street view of 8.3% annual sales growth and earnings $3.83 per share.
And looking further down the road, Green Mountain Coffee Roasters will undoubtedly benefit from its new partnership with Coca-Cola, as the two companies work together to develop and market the Keurig Cold beverage system. Keurig Cold will be unlike any other previous Keurig system in that it’s designed to dispense single servings of everything from soda to juice drinks to iced teas. So having the soda giant on board is a tremendous sign for the future of this product.
Before you buy any stock, you should always run it through my free Portfolio Grader ratings system. After having a rough time in 2011 and 2012, GMCR made a big comeback in 2013 as sales of its Keurig brewing systems really took off. So following its Q2 report in May, I upgraded the stock to a buy and the stock has stayed in buy territory ever since. GMCR has a two-hit combo of strong financial health (B Fundamental Grade) and robust institutional buying pressure backing the stock (B Quantitative Grade).
Of the eight fundamental metrics I graded GMCR on, it received Bs all down the line, with the exception of its A-rating for return on equity. After the latest earnings results I expect to maintain this rating.
Bottom Line: As of this posting I consider GMCR a B-rated Buy.
Would you like to check the fundamentals backing up one of your stocks? For more stock grades, please visit my Portfolio Grader website!