Why Keurig Green Mountain Is Up 65% in 2014

Keurig Green Mountain  (NASDAQ: GMCR  ) has been percolating this year. Shares of the undisputed champ of one-cup blasts of premium home- or office-brewed coffee have soared 65%, stunning naysayers who figured that its best days were in the past.

You don't have to look far to find the biggest contributor to Keurig Green Mountain's spike. Coca-Cola  (NYSE: KO  )  paying $1.25 billion for a 10% chunk of the company sent shorts scrambling for the exits. The world's leading beverage company was not only validating Keurig Green Mountain's business, but also helping to improve its fortunes by offering its killer soft-drink brands to the upcoming Keurig Cold beverage system. The cherry on top came a few months later when it paid far more than roughly $75 a share to increase its stake to 16%. 

Coca-Cola is no stranger to taking sips of other beverage lines. It's not afraid to write big checks to diversify into juices, iced tea, and vitamin-fortified water. Coffee is a no-brainer, even if its role in the Keurig Cold maker of chilled carbonated and non-carbonated beverages is what's been hogging most of the attention behind the deal.

However, it's not just Coca-Cola turning to Keurig Green Mountain for a boost to its own flat sales. Keurig Green Mountain also helps out its own cause. Sales growth of K-Cups has been reportedly accelerating in recent months. Dougherty & Company issued a report last month, noting that K-Cup unit sales for the four weeks through mid-June had grown 11.5%, accelerating from the high-single-digit pace at which it had been moving earlier in the year. Argus Research then upgraded the stock -- as the first half of the year neared, it closed with a price target of $140, forecasting a 10% spike in sales growth this year. That is higher than the 8% top-line uptick that was the analyst consensus at the time. 

The momentum is contagious. Over the past few weeks alone, we've seen Subway announce that all 30,000 of its locations in the U.S. and Canada will bring on K-Cup machines to be able to serve fresh java all day long, BJ's Wholesale Club turned to Keurig Green Mountain for its private-label K-Cup offering, and global giant Nestle worked with Keurig Green Mountain to put out the first line of K-Cups with creamer included.

All of these developments aren't too shabby for a company that some had left for dead two years ago, when the key patents governing its K-Cup portion packs expired. Keurig Green Mountain has made the most of the leveled playing field, and the excitement for new platforms in Keurig 2.0 and Keurig Cold will bring new waves of patent protection. 

Along the way, Keurig Green Mountain continues to surprise the market. It has easily beaten Wall Street's profit targets over the past several quarters, and while there will be challenges in the future as it tries to succeed with Keurig 2.0 and Keurig Cold, investors are following Coca-Cola by buying into the resilient company.

Warren Buffett now has a stake in Keurig via Coca-Cola, but something should scare him
At the recent Berkshire Hathaway annual meeting, Warren Buffett admitted this emerging technology is threatening his biggest cash cow. While Buffett shakes in his billionaire boots, only a few investors are embracing this new market, which experts say will be worth over $2 trillion. Find out how you can cash in on this technology before the crowd catches on, by jumping onto one company that could get you the biggest piece of the action. Click here to access a FREE investor alert on the company we're calling the "brains" behind the technology.

Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 3016129, ~/Articles/ArticleHandler.aspx, 8/29/2015 5:06:05 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Rick Munarriz

Rick has been writing for Motley Fool since 1995 where he's a Consumer and Tech Stocks Specialist. Yes, that's a long time. He's been an analyst for Motley Fool Rule Breakers and a portfolio lead analyst for Motley Fool Supernova since each newsletter service's inception. He earned his BBA and MBA from the University of Miami, and he now lives a block from his alma mater.

Today's Market

updated 19 hours ago Sponsored by:
DOW 16,643.01 -11.76 -0.07%
S&P 500 1,988.87 1.21 0.06%
NASD 4,828.33 15.62 0.32%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

8/28/2015 4:00 PM
GMCR $54.11 Up +0.12 +0.22%
Keurig Green Mount… CAPS Rating: **
KO $39.45 Up +0.18 +0.46%
Coca-Cola CAPS Rating: ****