Why Green Mountain Shares Cooled Off

Is this meaningful? Or just another movement?

Jeremy Bowman
Jeremy Bowman
Feb 7, 2013 at 4:21PM
Consumer Goods

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Green Mountain Coffee Roasters (UNKNOWN:GMCR.DL) were tasting bitter today, falling as much as 10% after its guidance came in below expectations.

So what: The maker of the Keurig single-cup brewing system said it expected to earn $0.70 to $0.75 per share and $1.01 billion to $1.04 billion in sales in the current quarter. EPS was within range, but analysts were looking for $1.06 billion in sales. Notably, the company soared past earnings estimates, posting profits of $0.76 a share against the pros' $0.65 projection. Only the revenue guidance missed and by just a few percentage points.

Now what: The market still seems jittery from Green Mountain's 2012 collapse when the stock lost 85% of its value caused largely by its K-cups going off patent. Shares had been dearly priced beforehand, but the company has managed to grow steadily despite predictions of its demise. Today's early sell-off seems unreasonable, considering Green Mountain still sees 16% revenue growth this quarter. Clearly, some investors agree as the stock rallied back to just a 5% loss for the day.