Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR) releases its next quarterly report tomorrow, and investors seem to be expecting a lot out of the company. Shares rose almost 4 percent during the regular trading day on Monday, but analysts at Stifel continue to rate the company as a Sell and are estimating the fair value of the company’s shares to be in the mid-$40s.

Green Mountain Coffee Roasters

Stifel raises EPS estimates for Green Mountain

Analysts Mark S. Astrachan and Edward McPike issued a report to investors this week explaining why they’re so bearish on Green Mountain—even though they expect the company to beat consensus in tomorrow’s report. They increased their fiscal 2013 earnings per share estimate to $3.28 and their 2014 estimate to $3.53 because they expect to see higher than expected gross margins because coffee costs were lower.

However, they lowered their sales growth estimate for this year to 11 percent and next year to 4 percent because they believe growth of the company’s Keurig brewers and K-Cups is slowing.

Strong results expected for Green Mountain’s Q2

The analysts are predicting that Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR) will report earnings per share for the June quarter of 84 cents. That’s higher than the company’s guidance of between 71 and 78 cents, mainly because coffee costs received a boost during the quarter. They’re projecting sales growth to be toward the low end of the company’s expectations. The analysts are expecting to see an overall 12 percent year over year increase, including 18 percent K-Cup sales growth and a 7 percent decline in shipments of the company’s Keurig brewers.

They believe that the benefit of the lower coffee cost is already reflected in Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR)’s shares and that it offsets the company’s weakening fundamentals.

Slowing brewer installed base

The Stifel analysts believe Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR) will continue to see its brewer shipments decelerate as households reach their peak penetration. As growth slows, they predict that the brewer installed base will decelerate faster than management expectations.

Slowing brewer growth will then, in turn, provide a negative impact on K-Cup sales, in their view. They note that K-Cup sales have already been negatively impact as unlicensed Keurig compatible pods have been stealing market share. They said unlicensed brands saw a 19 percent volume share in the most recent four-week period, compared to 9.3 percent this past January and 2 percent in July of last year. The analysts say unlicensed brands made up 49 percent of the category growth volume for the most recent four-week period.

In addition, per-unit pricing on Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR)’s K-Cups declined 4.1 percent year over year in the most recent four-week period, showing the close correlation between price and share.