Tomorrow morning, Green Mountain Coffee Roasters
Whitney Tilson did jump in for a few quick jabs, though, and even compared the company to famed Wall Street darling-turned-whipping boy Krispy Kreme Doughnuts
The company slashed full-year earnings estimates on the realization of softer sales. What's even less encouraging, though, is that it can't seem to figure out why. As the CEO put it, "We're still trying to really understand." The company did blame unseasonably warm weather for depressing sales, but that seems like a cop-out. The company managed to grow fiscal third-quarter sales over the first and second fiscal quarters last year, even though the third quarter includes warmer months, and the first and second quarter were extremely cold last year, with record low temperatures and snowfall.
The culprit I do buy is the "consumption pattern changes" the company cited. This, however, should come as no surprise, considering Einhorn blew the doors off this one months ago, when he modeled the painful decline in K-Cup consumption per individual after the initial purchase of consumers' Keurig devices.
For those who were looking to the Vue as the knight in shining armor for Green Mountain's patent-expiration woes, don't hold your breath. Green Mountain management identified sales of the device as "nominal." Ouch. The company doesn't expect device sales to be material this year, but given its whiff on estimates this quarter, and the fact that consumers will have very little reason to switch to a new device, I'm going to assume "this year" means "never."
Coffee Holding Company
So, is it dead?
I don't forecast a total implosion and crash to $0 for Green Mountain Coffee Roasters. After all, its revenue is still growing like wildfire. K-Cup refills were up 60% this quarter, too. The problem is, that's about half of last quarter's figure. Given that the company overestimated sales for its product, and that it has a health care-esque patent cliff looming, I would say it isn't done falling.
No, that doesn't meant its dead, per se. Green Mountain still has distribution agreements in place with all the right coffee slingers, including Starbucks
I've tried to warn investors about Green Mountain for some time now, even calling out the unlikely success of its Vue device. Instead, I've steered investors toward my favorite pick, Starbucks. Since then, Starbucks has jumped 21% while Green Mountain has fallen 3.6%.
If you missed the first few buy and sell recs, though, don't worry, because there are more. And our chief investment officer and I agree that The Motley Fool's Top Stock for 2012 is one you don't have to worry about. It has growth in all the right places, with no fishy Green Mountain-like accounting shenanigans. You can read about it today, and don't worry: This special analyst report is 100% free.
Austin Smith owns no shares of the companies mentioned here. The Motley Fool owns shares of Starbucks. Motley Fool newsletter services have recommended buying shares of Starbucks and Green Mountain Coffee Roasters, creating a lurking gator position in Green Mountain Coffee Roasters, and writing covered calls on Starbucks. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.