Green Mountain Coffee Roasters - Aggressive Growth

By Zacks | December 11, 2012 AAA

Earnings estimates for Green Mountain Coffee Roasters Inc. (GMCR) have trended higher following its robust fiscal fourth quarter report late last month, which included a positive earnings surprise of more than 36% and an enhanced outlook for fiscal 2013. As a result, all 11 estimates for its current fiscal year have advanced in the last 30 days. In addition, this specialty coffee maker is currently trading at a 46.8% discount to its 52-week high of $71.15. With long-term expected earnings growth of 17.9%, this Zacks #1 Rank (Strong Buy) is an attractive investment opportunity with significant growth of brands and sales. Solid Fourth Quarter Beat On November 27, Green Mountain Coffee Roasters reported fiscal fourth quarter adjusted earnings of 64 cents, surpassing both the Zacks Consensus Estimate and last year's earnings by 36.2%. Due to a calendar shift, the quarter included an additional week, which contributed about 7 cents. Earnings were primarily aided by solid top-line growth of 33.0% and a decrease in interest expense of 15.2%. The success of Keurig Single Cup Brewers, single serve packs (K-cups) and Keurig-related accessories drove the revenues. Impressive Guidance The company is focusing on its products and putting in efforts to turnaround its business. Apart from rolling out new products, Green Mountain Coffee Roasters is upgrading its Keurig brewing system to attract more customers. Based on its progress, the company raised its earnings per share projection for fiscal 2013 to between $2.64 and $2.74, instead of $2.55 to $2.65. The guidance for net sales growth was reiterated between 15% and 20%. Surge in Earnings Estimates Over the past 30 days, all 11 estimates for fiscal 2013 were revised upwards, lifting the Zacks Consensus Estimate by 6.8% to $2.67 per share. This indicates year-over-year growth of 11.3%. The Zacks Consensus Estimate for fiscal 2014 increased 13.8% to $3.05 per share, as 4 of 7 estimates moved upward. This reflects a year-over-year increase of 14.3%. Attractive Valuation Green Mountain Coffee Roasters currently trades at a forward P/E multiple of 14.2, which is at a discount of 11.8% to the peer group average of 16.1. The price-to-book (P/B) multiple for the stock is 2.6, which trades on par with the peer group average. Also, the stock has a trailing 12-month return on equity (ROE) of 17.6%, which is above its peer group average of 11.4%. Shares of Green Mountain have been rising consistently following the announcement of the solid fourth quarter results. Moreover, it is trading above its 200-day and 50-day moving averages, which stand at $31.24 and $26.64, respectively. Volume is strong, averaging roughly 7,549K daily. Headquartered in Waterbury, Vermont, Green Mountain Coffee Roasters is a provider of premium, specialty coffees, which it distributes through multiple wholesale distribution channels. Green Mountain offers coffee, tea as well as other beverages like hot apple cider, cocoa and other dairy-based beverages. The company's popular brands include Green Mountain Coffee, Tully's Coffee, Diedrich Coffee, Van Houtte, Timothy's World Coffee brand and others. The market cap of the company is $5.62 billion. Close peer Starbucks Corporation (SBUX) carries a Zacks #3 Rank (Hold).
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