Green Mountain Coffee Surges 25% on Better Than Expected Results


Green Mountain Coffee just reported earnings which beat expectations.  The street expected EPS of $0.48 versus reported earnings per share of $0.64. Net sales rose to $947  million from $712 million in the prior year. Shares of Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR) are soaring on the news, up over 25% in after hours trading.

GMCR is a favorite of short sellers, including one of the most famous ones, David Einhorn of Greenlight Capital.  We spoke to some shorts and they believe that Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR) beat estimates based on increasing inventory. They also noted that 40% of outstanding shares are held short, which may have led to a short squeeze causing the 25% increase.


GMCR’s new CEO, Brian Kelley will be talking the helm on December 3, 2012. Analysts estimate that Mr. Kelley will receive approximately $11 million upon becoming GMCR’s new CEO, consisting of a $6 million replacement grant of stock, a $3 million new equity grant, a $600k signing bonus, $500k for relocation, and a $900k base salary.

Interestingly, his options are priced using the average closing price of shares on the 20 trading days beginning December 3, 2012. Additionally, half of the replacement grant is tied to the achievement of pre-established financial targets.

Stifel Nicholas analysts recently issued a report on Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR) and noted the following.

Highlights of the note include:

  • Channel checks indicate new unaffiliated brewer entrants from Hamilton Beach and Bunn, further deceleration of K-Cup pricing, especially by Starbucks Corporation (NASDAQ:SBUX), private label support at Wal-Mart Stores, Inc. (NYSE:WMT), and the continued underwhelming rollout of Keurig Vue.
  • They believe recent commentary from GMCR management indicates an increased competitive dynamic, and possibly a strain, in GMCR’s relationship with Starbucks.
  • Household penetration of brewers is nearing a peak and they think commentary from management inflates the long-term opportunity.

For the twenty six weeks ended 26 March 2011, Green Mountain Coffee Roasters Inc.’s revenues increased 83% to $1.22B. Net income increased 99% to $67.8M. Revenues reflect an increase in sales from Specialty Coffee Business Unit and higher revenue from Keurig Business Unit. Net income reflects an increase in gross profit margin and higher other income (expense). The Company is engaged in the speciality coffee and coffee maker businesses.

Disclosure: No position in any securities mentioned