Green Mountain (GMCR) Shares Clobbered as Q2 Results Disappoint, Guidance Below the Street

May 2, 2012 6:23 PM EDT
Shares of Green Mountain (Nasdaq: GMCR) are getting absolutely crushed Wednesday afternoon following inline second-quarter profit and sales which were below the Street. The company's third-quarter and FY12 guidance was also worse than the Street had been expecting.

After closing at $49.52 this afternoon, Green Mountain shares are now trading around $28.40, down more than 42 percent in the after-hours session alone.

The company reported quarterly sales of $885.1 million, up 37 percent from the $647.7 million posted in the year-ago quarter, and versus the analyst consensus estimate of $971.7 million. About 90 percent of the company's sales during the quarter came from Keurig® Single Cup Brewers, single serve packs, and Keurig®-related accessories. Sales of single serve packs totaled $655 million, up 59 percent from the same quarter last year. Total brewer sales were 1.4 million units.

GAAP net income was $93 million while non-GAAP net income was up 42 percent to $101.7 million. On a per-share basis, pro-forma earnings were 64 cents, right inline with the Street estimate.

Gross margin declined from 37.6 percent in last year's second quarter to 35.4 percent due to: under-utilization of the manufacturing base, higher green coffee costs, higher write down of finished product and raw material inventory, and a increase in warranty expense.

"Over the past several years we achieved a strong net sales growth rate driven by consumers’ rapid acceptance of our innovative Keurig® Single Cup Brewing system," said Lawrence Blanford, GMCR's president and CEO. "Additionally, during this timeframe we made a number of strategic acquisitions that strengthened our long-term position and contributed to our growth rate. During the second fiscal quarter our 37% net sales growth resulted from more consumers adopting the ease and convenience of Keurig’s® Choose. Brew. Enjoy.™ approach to beverages. Despite lower-than-anticipated portion pack sales, and to a lesser degree, brewer sales, in the quarter we were able to control sales, general and administrative expenses enabling us to achieve non-GAAP earnings per share growth of 33%."

Green Mountain is looking for third-quarter earnings of 48-53 cents per share, worse than the Street estimate of 72 cents per share. FY12 EPS are expected to be in the range of $2.40-$2.50, also below the $2.67 analyst consensus estimate. Sales for the year will be about $3.8-$4 billion, versus the Street estimate of $4.3 billion.

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Leon Peris/Silver Spring on 2012-05-03 11:12:59
Mark as Spam | Reply to this comment

How do we know earnings are real.

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