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 coffee juggernaut Keurig Green Mountain Inc (UNKNOWN:GMCR.DL) fell as much as 10% early Thursday after the company announced weaker-than-expected fiscal first quarter 2015 results. By 1:15 p.m. shares had climbed back to a 4% loss for the day.
So what: Quarterly sales remained flat over the year-ago period at $1.386 billion, while adjusted earnings per share fell around 8% to $0.88. Analysts, on average, were looking for earnings of $0.89 per share on sales of $1.47 billion.
Keurig Green Mountain CEO Brian Kelley explained that while earnings per share fell in line with management's outlook, "Revenue came in below our expectations primarily due to a weaker than expected holiday season for brewers, including the effect of the voluntary recall on certain MINI Plus brewers, and greater-than-expected retailer portion pack inventory reductions."
Now what: For the current quarter, Keurig Green Mountain sees net sales growth in the mid-single digits over the same period last year, and adjusted earnings per share of $1.00 to $1.05. Note that range includes roughly $0.08 per share in dilutive impact from the fiscal 2014 transactions with Coca-Cola and Lavazza, and a $0.07 headwind from foreign currency exchange. By contrast, Wall Street was modeling earnings of $1.18 per share and 11.5% growth in revenue to $1.23 billion.
Finally, for all of fiscal 2015, Keurig now expects year-over-year net sales growth in the mid- to high-single-digit range, with adjusted earnings-per-share growth in the mid-single digits. Analysts were looking for earnings and revenue to grow 7.4% to $4.22 per share and 12.1% to $5.28 billion, respectively.
In the end, I can't blame the market for bidding down shares of Keurig Green Mountain today given its weak holiday season and cautious outlook. But that weakness could also prove temporary as inventories fall in line and ahead of the expected launch of Keurig Cold this fall. For now, that's why I'll personally be putting Keurig Green Mountain on my watch list to keep tabs on its progress in the coming quarters.