Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Can Your K-Cup Do That?

By Rick Munarriz - Updated Apr 6, 2017 at 10:02PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Green Mountain has another blowout quarter.

Can life get any better for Green Mountain Coffee Roasters (Nasdaq: GMCR)?

Analysts had set the bar high for the maker of Keurig brewers and java-loaded K-Cup refills. They figured that Green Mountain's net sales would soar 94% to $629.4 million, with adjusted profitability nearly doubling to $0.38 a share.

Slackers! Green Mountain's net sales more than doubled to $647.7 million, with non-GAAP earnings skyrocketing 131%, to $0.48 a share.

Remember the bears fretting about decelerating growth? Care to call up the worrywarts that were concerned that brewer sales were outpacing K-Cups, pointing to waning usage of these single-cup systems? Well, a 94% spike in high-margin K-Cups outpaced the 86% uptick in brewers and accessories. The recent Van Houtte acquisition accounted for the rest of the top-line swagger.

This isn't too shabby, and it all takes place before Green Mountain's model-affirming K-Cup deal with Starbucks (Nasdaq: SBUX) kicks in.

The only downer in last night's news is that Green Mountain knows how good it looks. The company wants to cash in on its strong showing and buoyant share price by printing 7.1 million new shares.

This isn't the first time that Green Mountain has gone the secondary route after a monster rally, but the company's shares have more than tripled since its last dilutive offering two summers ago.

It's off to a running start this time, too. Green Mountain dramatically boosted its guidance, silencing any near-term dilution concerns.

Green Mountain now expects to earn between $1.43 and $1.50 a share on an adjusted basis this year, blowing to bits its earlier outlook that called for no more than $1.29 a share in net income. It sees net sales soaring 82% to 87%, ahead of its earlier target of 75% to 80%.

Green Mountain hasn't had any problem wooing shareowners and partners. Dunkin' Donuts and ConAgra's (NYSE: CAG) Swiss Miss Hot Cocoa have hopped on the K-Cup bandwagon since Starbucks' February announcement. They join Caribou (Nasdaq: CBOU), Hain Celestial's (Nasdaq: HAIN) Celestial Seasonings, and Folgers parent J.M. Smucker (NYSE: SJM) as hot beverage heavies partnering with Green Mountain for a K-Cup close-up.

Shares of the up-and-coming coffee champ closed yesterday at 44 times the midpoint of Green Mountain's guidance for the current fiscal year. It's a high number, but it's hard to argue that the stock is overvalued when it's growing at a much headier clip than its bottom-line multiple.

The stock's caffeinated for a reason.

Is Starbucks a threat to Green Mountain or the other way around? Share your thoughts in the comment box below.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Keurig Green Mountain, Inc. Stock Quote
Keurig Green Mountain, Inc.
GMCR.DL
Starbucks Corporation Stock Quote
Starbucks Corporation
SBUX
$115.97 (2.30%) $2.61
The J. M. Smucker Company Stock Quote
The J. M. Smucker Company
SJM
$130.36 (-0.47%) $0.62
Conagra Brands, Inc. Stock Quote
Conagra Brands, Inc.
CAG
$31.81 (0.13%) $0.04
The Hain Celestial Group, Inc. Stock Quote
The Hain Celestial Group, Inc.
HAIN
$38.72 (-0.54%) $0.21

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
633%
 
S&P 500 Returns
140%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/07/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.