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Green Mountain Coffee Q2 Profit Soars, Meets Estimate; Guides Q3 Below Street View - Update

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Green Mountain Coffee Roasters Inc. (GMCR: Quote) Thursday reported a sharp increase in profit for the second quarter, driven by higher sales, especially from its Keurig Single-Cup Brewing System. On an adjusted basis, earnings more than doubled and met estimates. The company provided earnings guidance for the third quarter, which is expected to come below Street view, and also announced a three-for-one stock split to be effected in the form of a stock dividend.

Net income for the quarter grew to $24.7 million or $0.54 per share from $13 million or $0.33 per share in the same quarter last year. Latest quarter results included about $5 million or $0.06 per share of transaction expenses related to the pending Diedrich Coffee, Inc. sacquisition as well as $3 million or $0.04 per share, of amortization of identifiable intangibles related to the company's prior acquisitions.

Excluding items, net income more than doubled to $27.8 million from $13 million, while earnings per share increased to $0.60 from $0.33 in the prior-year quarter. On average, 10 analysts polled by Thomson Reuters expected the company to earn $0.60 per share for the quarter. Analysts' estimates typically exclude special items.

The Waterbury, Vermont-based company's net sales increased 68% to $324.9 million from $193.4 million in the comparable quarter. Analysts expected the company to report revenues of $322.40 million for the quarter.

Commenting on the results, President and Chief Executive Officer Lawrence Blanford said, "GMCR's Keurig Single-Cup Brewing System continues to gain awareness and adoption nationwide, fueling our strong revenue and EPS growth."

At Keurig business unit, net sales, after the elimination of inter-company sales, were up 68% at $171.3 million, with about two-thirds of the increase driven by very strong K-Cup sales to retailers and to consumers from Keurig.com. The company said 720 million K-Cup portion packs were shipped system-wide by all Keurig licensed roasters, representing an increase of 67% over the year-ago quarter. Total K-Cup net sales increased 92%.

Specialty Coffee business unit's net sales grew 69% to $153.6 million, after the elimination of inter-company sales.

Gross profit for the for the quarter improved to $108.65 million from $61.98 million in the prior year. As a percentage of total net sales, gross profit increased to 33.4%, up from 32.1% last year, driven by the higher manufacturing gross margin derived from the increase in volume of the company's manufactured K-Cups as a percentage of total system volume.

For the six-month period, net income grew to $37.20 million or $0.81 per share from $27.37 million or $0.70 per share last year. Half-yearly sales were $674.28 million, up from $390.33 million last year.

Looking ahead to the third quarter, the company expects adjusted earnings to be in the range of $0.50 per share pre-split to $0.54 per share pre-split or $0.16 per share post three-for-one split to $0.18 per share post three-for-one split, with total consolidated net sales growth to be in the range of 58% to 63%. Analysts currently anticipate the company to earn $0.57 per share on revenue of $300.65 million for the quarter.

For the full year, on an adjusted-basis, earnings is expected to be in the range of $2.04 per share to $2.14 per share pre-split, or $0.68 per share to $0.71 per share post three-for-one split. The company noted that this adjusted earnings estimate range is consistent with its guidance range for reported earnings of $1.95 per share to $2.05 per share provided in its first quarter. Further, the company lifted its total consolidated net sales growth guidance to be in the range of 62% to 65%, up from prior estimates range of 57% to 62%.

Analysts currently anticipate the company to earn $2.04 per share on revenue of $1.31 billion for the full year.

The company also said its board approved a three-for-one stock split to be effected in the form of a stock dividend. The company will distribute two additional shares of its common stock for every one share of common stock to all shareholders of record at the close of business on May 10, 2010. The shares will be distributed on Monday, May 17, 2010.

In Wednesday's regular trading session, GMCR closed trading at $86.91 on the Nasdaq.

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by RTT Staff Writer

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