Keurig Green Mountain (GMCR) Stock Could 'Pause' Near-Term, Says Goldman Sachs

Goldman Sachs earlier maintained a Buy rating on Keurig Green Mountain (NASDAQ: GMCR) with a price target of $185. Analyst Judy E. Hong thinks its cold launch will be "back-end loaded" and warned of a "pause."

"We remain Buy rated and see multi-years of solid top- and bottom-line growth for GMCR. With the Cold launch more back-end loaded, we could see the stock taking a pause in the near term following a sizable run-up since early 2014," said Hong. "Keurig Cold is set to launch in Fall 2015, slightly later than we assumed in our model. While the launch is likely to be a drag on profit in FY15, we remain optimistic in sales and profit contribution from Cold in the out-years."

Commenting on its Q4 results and guidance, she said, "4Q14 beat was driven by stronger sales growth (in part due to the benefit from pre-ordering ahead of SAP), higher gross margins and better OpEx leverage. We increase our FY15 EPS estimate 1% to $4.30, reflecting 12% sales growth and 9% EPS growth. FY15 sales will be impacted by a pull forward of portion pack sales into 4Q, FX and negative mix, but we expect (1) a continued increase in the installed base; (2) market share gains; and (3) margin expansion in Hot. Given the multiple levers, we view GMCR’s FY15 guidance of sales growth in high-single digits/low-double digits and EPS growth of mid-single digits/high-single digits (including $0.27 dilutive impact from KO/Lavazza equity transactions and $0.04 from FX) as sufficiently conservative."

For an analyst ratings summary and ratings history on Keurig Green Mountain click here. For more ratings news on Keurig Green Mountain click here.

Shares of Keurig Green Mountain closed at $153.95 yesterday.

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