Caribou (CBOU) Price Target Cut Due to Transition at Keurig - Dougherty & Co.

August 7, 2012 1:59 PM EDT Send to a Friend
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Price: $15.99 --0%

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    Up: 9 | Down: 10 | New: 35
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Analysts at Dougherty & Co cut their price target on Caribou Coffee (NASDAQ: CBOU) to $13.00 from $15.00. The price cut reflects a transition in K-Cup royalties.

Gregory J. McKinley, an analyst at the firm, described the situation as follows. "CBOU earns substantially all of its gross profit with Keurig from K-Cup royalties, not green coffee sales, and recent price stratifying in which GMCR raised the price of CBOU-branded K-Cups hurt CBOU’s royalties, which are volume-based."

"Looking into 2H 2012 and 2013, commodity costs as an earnings headwind will abate meaningfully, but we expect earnings from this benefit to receive a low multiple from investors. Considering the transition of the Keurig business and reduced revenue and earnings outlook, we are lowering our price target to $13, or 6.0x our revised 2013 EBITDA estimate based on our projected 2013 balance sheet," noted McKinley.

Dougherty & Co. has a Buy Rating on Caribou.

For an analyst ratings summary and ratings history on Caribou Coffee click here. For more ratings news on Caribou Coffee click here.

Shares of Caribou Coffee closed at $10.95 yesterday.


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