Tuesday, February 1, 2011

Green Mountain Coffee Roasters Inc. (NASDAQ: GMCR): Q1 Earnings Preview 2011

Green Mountain Coffee Roasters Inc. (NASDAQ: GMCR) is scheduled to release its fiscal first-quarter earnings after the closing bell on Wednesday, February 2, 2011. Analysts, on average, expect the company to report earnings of 17 cents per share on revenue of $543.71 million. In the year ago period, the company reported earnings of 12 cents per share on revenue of $349.36 million.

Green Mountain Coffee Roasters, Inc. operates in the specialty coffee industry in the United States and internationally. The Company operates in two business segments: the Specialty Coffee business unit (SCBU) and the Keurig business unit (Keurig).

In the preceding fourth quarter, the Waterbury, Vermont-based company's net income was $26.99 million or $0.20 per share compared to $14.05 million or $0.11 per share in the previous year. After adjusting for acquisition-related expenses of $4.96 million, net income for the quarter was $29.81 million or $0.22 per share. After adjusting for acquisition-related expenses of $4.96 million, net income for the quarter was $29.81 million or $0.22 per share. Analysts, on average, expected the company to post earnings of $0.20 per share per share on revenue of $359.18 million.

At its last earnings call in December, the company said that it expects first non-GAAP earnings in the range of $0.14 to $0.18 per share and anticipates total consolidated net sales growth of 55% to 65%.

For fiscal year 2011, the company cut its non-GAAP earnings guidance to a range of $1.19 to $1.29 per share from the previous range of $1.24 to $1.29 per share. The company also expects net sales growth of 45% to 53%, up from prior estimates of 44% to 50% reflecting higher pricing and anticipated lower unit volume as a result of the previously announced price increase. Green Mountain told investors “not to rely on” its July 28 forecast for K-Cup shipments to rise 64% to 68% in fiscal 2011. Furthermore, the company said it will no longer provide shipment forecasts for its K-Cups or Keurig single-cup coffee brewing machines.

The company said that it’s investing in packaging and production lines to keep up with demand for K-Cups. Green Mountain, which has been heavily advertising its Keurig brewers as a winter holiday gift, said it expects K-Cup sales to increase in 2011.

Green Mountain has seen its sales rise as it incorporated the Keurig single-cup coffee business to its lineup. But like many coffee-related businesses, it is struggling with massive increase in coffee bean prices, which remain volatile.

GMCR holds all patents for K-Cup portion packs, so all packs sold today are either manufactured by the company or sold by licensees who pay royalties to Green Mountain. The patents covering the K-Cup technology expire between 2012-2017 (with some possible extensions). After Green Mountain loses exclusivity on this technology, anyone who wants to make K-Cups will be able to do so. The company has spent the past few years acquiring different coffee brands in an effort to insulate itself from the ill effects of this coming shift.

During the quarter in review, the company announced the successful completion of its LJVH Holdings Inc. or Van Houtte acquisition for an aggregate cash purchase price of CAD$915 million, or USD$905 million. GMCR said that it expects the Van Houtte acquisition to be neutral to slightly dilutive to earnings per share in the first twelve months after closing, and accretive thereafter. GMCR expects to adjust its fiscal 2011 estimates to include the effects of the acquisition when it reports its fiscal first quarter results. GMCR financed the Van Houtte acquisition through a combination of cash on hand and new debt financing.

The specialty-coffee roaster is currently under the scrutiny of the Securities and Exchange Commission (SEC) and is facing numerous class action lawsuits alleging securities fraud.  In particular, plaintiffs are alleging false and misleading disclosures in violation of federal securities laws.

Full Disclosure: None.
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