Can Your K-Cup Do That?

Can life get any better for Green Mountain Coffee Roasters (Nasdaq: GMCR  ) ?

Analysts had set the bar high for the maker of Keurig brewers and java-loaded K-Cup refills. They figured that Green Mountain's net sales would soar 94% to $629.4 million, with adjusted profitability nearly doubling to $0.38 a share.

Slackers! Green Mountain's net sales more than doubled to $647.7 million, with non-GAAP earnings skyrocketing 131%, to $0.48 a share.

Remember the bears fretting about decelerating growth? Care to call up the worrywarts that were concerned that brewer sales were outpacing K-Cups, pointing to waning usage of these single-cup systems? Well, a 94% spike in high-margin K-Cups outpaced the 86% uptick in brewers and accessories. The recent Van Houtte acquisition accounted for the rest of the top-line swagger.

This isn't too shabby, and it all takes place before Green Mountain's model-affirming K-Cup deal with Starbucks (Nasdaq: SBUX  ) kicks in.

The only downer in last night's news is that Green Mountain knows how good it looks. The company wants to cash in on its strong showing and buoyant share price by printing 7.1 million new shares.

This isn't the first time that Green Mountain has gone the secondary route after a monster rally, but the company's shares have more than tripled since its last dilutive offering two summers ago.

It's off to a running start this time, too. Green Mountain dramatically boosted its guidance, silencing any near-term dilution concerns.

Green Mountain now expects to earn between $1.43 and $1.50 a share on an adjusted basis this year, blowing to bits its earlier outlook that called for no more than $1.29 a share in net income. It sees net sales soaring 82% to 87%, ahead of its earlier target of 75% to 80%.

Green Mountain hasn't had any problem wooing shareowners and partners. Dunkin' Donuts and ConAgra's (NYSE: CAG  ) Swiss Miss Hot Cocoa have hopped on the K-Cup bandwagon since Starbucks' February announcement. They join Caribou (Nasdaq: CBOU  ) , Hain Celestial's (Nasdaq: HAIN  ) Celestial Seasonings, and Folgers parent J.M. Smucker (NYSE: SJM  ) as hot beverage heavies partnering with Green Mountain for a K-Cup close-up.

Shares of the up-and-coming coffee champ closed yesterday at 44 times the midpoint of Green Mountain's guidance for the current fiscal year. It's a high number, but it's hard to argue that the stock is overvalued when it's growing at a much headier clip than its bottom-line multiple.

The stock's caffeinated for a reason.

Is Starbucks a threat to Green Mountain or the other way around? Share your thoughts in the comment box below.

Green Mountain is a Motley Fool Rule Breakers selection. Starbucks is a Motley Fool Stock Advisor recommendation. Alpha Newsletter Account, LLC has opened a short position on Green Mountain. Motley Fool Options has recommended a lurking gator position on Green Mountain. The Fool owns shares of Starbucks. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Longtime Fool contributor Rick Munarriz can actually walk to three Starbucks from his home but he's still not much of a coffee sipper. He's had a Keurig brewer in his home since Christmas of 2007. He does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


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