Starbucks (SBUX) Q3 Results Pressure Green Mountain (GMCR), But Is the Sell Off Overdone?

July 27, 2012 8:58 AM EDT
Green Mountain Coffee Roasters (Nasdaq: GMCR) is seeing early pressure Friday following third-quarter results from coffee giant Starbucks (Nasdaq: SBUX). Starbucks missed on the top- and bottom-lines, with EPS of 43 cents and revs of $3.3 billion.

The company mentioned that channel development was up 25 percent and is looking for margins to improve through the end of 2012.

On the company's conference call, CEO Howard Schultz commented:

"Starbucks will continue to play a leading role with the expansion of new forms and flavors in VIA and K-Cup. And we're the second largest player in the premium single cup with Starbucks K-Cups continuing to make good progress against our volume distribution and share growth plans and have already shipped more than 350 million K-Cups since last November’s launch. We are anticipating further growth of our premium single-cup business with the availability of Starbucks branded Vue packs agreement on this new Keurig Vue brewer this fall."

CFO Troy Alstead also said: "Revenue grew 45% in the third quarter to $316 million up nearly $100 million over the last Q3. Starbucks K-Cups, which continued to grow share and distribution for the largest driver of the year-over-year increase. As Howard mentioned, premium coffee is now the largest segment of the coffee market with premium single-cup coffee making that nearly 20 percent of the market."

So, while shares might be pressured today, investors might look at steps being taken by the coffee giant to continue pushing its single-serve segment higher in the coming quarters.

Green Mountain will release third-quarter results on August 1st, after the close of the market. Shares are indicated over 2 percent lower Friday morning.

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