Green Mountain Coffee Roasters
First-quarter net income actually dropped 13.2%, to $12.5 million, or $0.27 per share. Excluding last year's favorable patent litigation settlement, though, earnings rocketed a stunning 163%. Green Mountain's most recent quarterly results were also slowed by $5 million in transaction expenses for its acquisition of Timothy's Coffees of the World.
The quarter's sales were roasting, surging 77% to $349.4 million. Green Mountain managed to increase gross margins by 200 basis points to 29.1% of sales, compared to 27.1% this time last year.
The quarter was good enough that Green Mountain also added a dime to the top and bottom ends of its earnings guidance for fiscal 2010, now estimated at $1.95 to $2.05 per share.
Meanwhile, thanks to wider distribution deals in outlets such as Wal-Mart Stores
Green Mountain continues to defy rivals such as Starbucks, Caribou
I've often been bearish on Green Mountain over the years, given its premium stock price and acquisitive ways. Those sorts of purchases can be difficult to digest -- although in fairness, that strategy worked out well in Keurig's case -- and they make financial statements far more complicated for investors to peruse. Plus, its abundance of buyouts has weakened Green Mountain's balance sheet, decreasing cash by 58%, to almost $124 million in the quarter.
With its stock up more than 200% in the last year, Green Mountain trades at a forward price-to-earnings ratio of 44, trumping big-coffee rival Starbucks' forward P/E of 20. Despite its great results, I prefer stocks that are a tad less risky and pricey than Green Mountain is now, and I strongly suspect that investors should put down the coffee and walk away.
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