Janney Montgomery Scott Raises Price Target and Estimates on Green Mountain (GMCR) On Better Margins

May 9, 2011 9:52 AM EDT Send to a Friend
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Price: $146.86 -0.68%

Rating Summary:
    9 Buy, 9 Hold, 1 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 24 | Down: 21 | New: 17
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Janney Montgomery Scott raised estimates and its price target on Buy-rated Green Mountain Coffee Roasters (NASDAQ: GMCR) following strong Q2 results.

The firm's price target goes from $90 to $100. FY11 operating cash EPS estimates go from $1.28 to $1.50 and FY12 from $2.08 to $2.40, including the new shares issued.

The firm comments, "GMCR's second quarter results brought to fore the least appreciated aspect to the story - margin expansion."

Specifically, Janney sees EBIT margin potential improving to the 20% level in FY13, up from 14% estimated in FY11. The firm notes that gross margin had been artificially depressed by the high percentage of zero (or slightly negative) brewer margins. "As the K-Cup revenue builds from the growing installed base of brewers, K-Cup revenue increases as a percentage of the total and improves the gross margin on simple revenue mix. Going forward, SG&A expense as a percentage of sales should begin to fall further, enhancing the EBIT margin potential which we see improving to the 20% level in FY13, up from 14% estimated in FY11."

For more ratings news on Green Mountain Coffee Roasters click here and for the rating history of Green Mountain Coffee Roasters click here.

Shares of Green Mountain Coffee Roasters closed at $75.88 yesterday.


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