The coffee industry is back in the news with David Einhorn, renowned short-seller, slamming Green Mountain Coffee Roasters
Despite a questionable economic outlook, Green Mountain has been a strong player in the coffee industry. It acquired Keurig, a coffee machine manufacturing company, in 2006. With this acquisition, Green Mountain bought a strong product portfolio that consisted of coffeemakers and K-Cup machines that brewed single cups of hot beverages. Currently, K-Cups are Green Mountain's most popular offering, bringing in a major portion of its revenue. Einhorn, who is famous for predicting the fall of the now-defunct Lehman Brothers, among other things, said that in addition to discrepancies in Green Mountain's financial disclosures, its K-Cups were expensive product offerings, not justifying their cost.
However, I don't see the popularity of K-Cups going down anytime soon. For one, the Vermont-based company is quickly expanding into the retail segment and already has its K-Cup offerings in Wal-Mart
With the exception of the most recent quarter, Green Mountain has consistently outperformed analysts' expectations. The company's quarterly results topped market expectations for four of the last five quarters, with profit rising year over year by 44.7%. In the third-quarter results declared in July 2011, Green Mountain reported that its net income increased from $0.13 per diluted share last year to $0.37.
The flavor of partnerships
While past figures are impressive, Green Mountain's future growth prospects are even better. In addition to its product offerings in Wal-Mart and Target, the company is also planning a business partnership with Starbucks
In addition to this, the rising commodity prices that have affected competitors like Kraft Foods
The Fool's line
Considering the popularity of its products, business deals, and partnerships, I think Green Mountain brings a newly fresh opportunity for investors. I wouldn't let the comments of a single analyst determine my outlook on the stock. If anything, I would take a fresh look at my investment options and give serious consideration to Green Mountain as a long-term bet now that they have fallen from their previously lofty multiples.
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Vibhuti Shah doesn't own any shares in the companies mentioned above. The Motley Fool owns shares of Starbucks and Wal-Mart Stores. Motley Fool newsletter services have recommended buying shares of Wal-Mart Stores, Green Mountain Coffee Roasters, and Starbucks. Motley Fool newsletter services have recommended creating a lurking gator position in Green Mountain Coffee Roasters. Motley Fool newsletter services have recommended creating a diagonal call position in Wal-Mart Stores. 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. The Motley Fool has a disclosure policy.