Keurig (GMCR) Bull Not Ready to Throw in Towel

Keurig Green Mountain (NASDAQ: GMCR) bull analyst Akshay S. Jagdale of KeyBanc hasn't given up on the stock yet, despite soft results and guidance that lead to a 29% drop and shares and prompted other firms to downgrade the stock. Jagdale reiterated his over Overweight rating on Keurig but lowered his price target to $100.00 (from $120.00).

"GMCR’s execution and ability to manage expectations continued to disappoint this quarter. The incremental negative was the unexpected ~24% sales decline in the AFH channel (~25% of sales), which drove the miss on K-cup sales. As such, we now assume LT category growth for the Hot platform to be ~8-10% (down from 10-15% before), but continue to believe earnings can resume growing at a 15-17% pace once lingering brewer issues are lapped," said Jagdale.

"Our thesis proved wrong this quarter, primarily on our expectations for category growth. Measured channel growth of 15% came in as expected, but the unmeasured channel (very low visibility) growth was significantly below expectations. Specifically, within the unmeasured channels (45% of sales), the AFH channel (~25% of sales) reported an unexpected ~24% decline in sales driving the entire 8 point miss in K-cup sales growth relative to our estimate. Although disappointing, the deceleration in category growth is likely to reverse if recent brewer trends continue to hold," added the analyst.

A ratings summary and history on Keurig Green Mountain is here. For more ratings news on Keurig Green Mountain click here.

Shares of Keurig Green Mountain closed at $74.98 yesterday.

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