How High Can Green Mountain Earnings Send Shares?

Green Mountain Coffee (NASDAQ: GMCR  ) will release its quarterly report on Wednesday, and the stock has continued to defy naysayers who expected an inevitable pullback for the successful maker of single-serve coffee-brewing systems. Even with the stock continuing to shoot up, Green Mountain earnings have kept pace, and bullish investors expect that trend to continue this quarter as well.

It seemed as though Green Mountain would have a big problem when its K-Cup design lost patent protection, as revenue that it earns from K-Cup sales helps supplement the sales of its Keurig single-serve machines. But so far, a combination of loyal customers and smart partnerships has helped the company maintain its competitive edge and keep earnings up. Let's take an early look at what's been happening with Green Mountain Coffee over the past quarter and what we're likely to see in its report.

Stats on Green Mountain Coffee

Analyst EPS Estimate

$0.77

Year-Ago EPS

48%

Revenue Estimate

$981.9 million

Change From Year-Ago Revenue

13%

Earnings Beats in Past 4 Quarters

4

Source: Yahoo! Finance.

Can Green Mountain earnings stay perky this quarter?
Analysts have only gotten more enthusiastic about Green Mountain earnings in recent months, expanding their June-quarter profit estimates by $0.12 per share and raising their full-year fiscal 2013 projections by almost triple that amount. The stock has remained strong, rising 37% since early May.

Most of the share-price gains that Green Mountain has experienced came right after its March-quarter earnings report, when the company posted a 14% jump in net sales. Despite a 10% drop in brewing-system sales, growth in revenue from K-Cups and Vue packs more than made up the difference, with the positive side effect of boosting margins. Cheaper coffee costs also helped the company despite its green initiative in favoring premium brands.

Yet the big news from the quarter was that Starbucks (NASDAQ: SBUX  ) renewed its partnership with Green Mountain, signing on to a five-year commitment to supply branded K-Cups for the Keurig and tripling the number of individual products on the platform. With some having expected Starbucks to back out of the partnership and work independently in producing Keurig-compatible single-serve pods of its own, the news gave Green Mountain investors more certainty about its future and removed a major competitive threat.

Green Mountain has also had other partners sign up to boost their own presence via the Keurig. In May, Dr Pepper Snapple launched new Snapple K-Cup packs, helping the drink-maker compete against rivals like Hain Celestial and Unilever's Lipton that had already joined the K-Cup craze.

One interesting move from Green Mountain involves the filing last month of a trademark application for a carbonated-beverage maker. Although some investors think the move could be a direct assault against specialist SodaStream, it's possible that the company is more interested simply in being able to offer sparkling beverages of its own to compete against its more direct rivals.

In the Green Mountain earnings report, watch to see if the disparity between brewer and K-Cup sales continues. Better margins are desirable, but ideally, Green Mountain should still have room to grow its brewer sales through overseas initiatives and other sales drivers, leading to stronger revenue across the platform.

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