On Wednesday, Green Mountain Coffee (GMCR +0.00%) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.
Green Mountain Coffee had many investors worried that once the patents expired on its popular K-Cups for its Keurig single-serve coffee-brewing machine, the company's future prospects looked grim. But so far, the company has defied those fears. Let's take an early look at what's been happening with Green Mountain Coffee over the past quarter and what we're likely to see in its quarterly report.
Stats on Green Mountain Coffee
|
Analyst EPS Estimate |
$0.73 |
|
Change From Year-Ago EPS |
14.1% |
|
Revenue Estimate |
$1.02 billion |
|
Change From Year-Ago Revenue |
15.8% |
|
Earnings Beats in Past 4 Quarters |
3 |
Source: Yahoo! Finance.
Can Green Mountain brew up more success this quarter?
In recent months, analysts have gotten more optimistic about Green Mountain's long-term prospects. They've kept estimates for the just-ended quarter unchanged, but they've boosted their full-year fiscal 2013 consensus by $0.13 per share. The stock has been even giddier, rising more than 30% since late January.
Green Mountain continues to power ahead with its combination of Keurig brewers and K-Cup coffee sales. The company has even won several awards during the past several months, including a gold Edison Award for its new Keurig Vue brewing system and the Harris Poll's Brand of the Year award in the coffee-maker category.
But even though the company hasn't seen a big drop in post-patent K-Cups sales just yet, it may be just a matter of time before they take at least a modest bite out of sales. Kraft (KRFT +0.00%) said last October that it would start offering its popular Maxwell House brand in K-Cup-compatible containers within a few months, and this quarter's results should provide a good gauge of whether they pose a threat to Green Mountain's past K-Cup dominance.
Perhaps in response to that uncertainty, Green Mountain has stayed conscious of costs. It chose back in March to cut a small number of workers in the U.S. and Canada, representing less than 2% of its total labor force. By eliminating unnecessary expenses when possible, Green Mountain puts itself in a better position to fight back against competitors.
One interesting question facing Green Mountain is how to handle the recent drop in coffee prices. For years, Kraft, Starbucks (SBUX 2.90%), and other coffee giants passed through price hikes to customers. But after the drop, Kraft and Starbucks have made competitive drops in a potential price war, but Green Mountain has used the opportunity to convert its blends to fair-trade beans while promising not to pass through higher costs to customers.
In its quarterly report, watch to see how Green Mountain maps out its future strategic plans. Low coffee prices give the company some extra room to maneuver, but it still needs to take steps to retain its competitive edge in the face of competition from Starbucks and others.
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