Specialty coffee retailer, Green Mountain Coffee Roasters Inc. (GMCR – Analyst Report), delivered robust fourth-quarter 2013 adjusted earnings (excluding amortization of identifiable intangibles and SEC-inquiry related expenses) of 89 cents per share, beating the year-ago quarter earnings by 56%. It also beat the Zacks Consensus Estimate of 74 cents by 20.3% and surpassed the company’s guidance of 69 cents–74 cents. The stellar growth was on the back of solid top-line improvement and enhanced operational efficiencies.
Consolidated Revenues and Margins
GreenMountain’s quarterly net sales rose 22.0% to $1.0 billion from $856.7 million in the comparable prior-year quarter, backed by 37% growth in the sales of brewers and accessories.
The U.S. business segment also backed net sales growth by 26% during the fourth quarter. The Canadian business contributed 4% to total sales during the quarter. Sales beat the Zacks Consensus Estimate of $964 million.
Gross margin inflated 240 basis points (bps) to 36.0% due to favorable green coffee costs, lower wastage cost of finished goods and raw materials, lower warranty expense and labor and overhead manufacturing costs.
Adjusted operating income went up 36% to $190.6 million. Adjusted operating margin inflated 180 bps to 18.2% backed by favorable green coffee costs and positive pricing.
Net sales of Single Serve Packs increased 23.0% year over year to $777.9 million due to a substantial 29 percentage points surge in volume, partially offset by mix and pricing headwinds.
Net sales of Brewers and Accessories gained 37.0% from the comparable prior-year quarter to $190.4 million mainly due to product mix backed by strong shipments and volume.
Approximately 92% of fourth-quarter fiscal 2013 net sales was contributed by the sales of KeurigSingle Cup Brewers, portion packs and Keurig-related accessories, with the remainder coming from bagged coffee, fractional packs and our Canadian office coffee services business.
Net sales of Other products slipped 10% to $78.9 million due to a demand shift from traditional coffee package formats to single-serve packs.
Fiscal 2013 Results
During fiscal 2013, adjusted earnings (excluding amortization of identifiable intangibles and SEC-inquiry related expenses) of $3.39 per share beat the year-ago quarter’s earnings by 45%. It also beat the Zacks Consensus Estimate of $3.25 per share by 4.3% and surpassed the company’s guidance of $3.05 to $3.15. The stellar growth was on the back of solid top-line expansion.
Net sales for fiscal 2013 rose 16.0% to $4.4 billion from $3.8 billion in the comparable prior-year quarter, backed by strong sales growth of brewers and accessories. Sales beat the Zacks Consensus Estimate of $4.3 billion.
Other Financial Details
Green Mountain announced a new share repurchase authorization of up to $1 billion which will commence upon completion of the company’s current $500 million program.
Guidance
Management believes that there are ample opportunities of expanding its Keurig system in the domestic market. The company has issued its outlook for fiscal 2014. Green Mountain expects its adjusted earnings per share in the range of $3.75 to $3.85. The company expects mid single-digit net sales growth over fiscal 2013. Free cash flow is estimated to be in the range of $200 million–$300 million.
GreenMountainalso provided its outlook for first-quarter 2014. The company expects adjusted earnings per share in the range of 85 cents–90 cents and sales growth in the range of 12% to 18%. The guidance reflects the company’s continuous efforts to increase brand investments and product innovations.
GMCR aims to achieve double-digit growth in annual revenues and annual earnings growth in the mid-teens over the long term.
The Zacks Consensus Estimate for the first quarter and fiscal 2014 are pegged at 98 cents a share and $3.78 per share, respectively.
GreenMountaincurrently carries a Zacks Rank #2 (Buy). Other consumer staples stocks worth considering are Pinnacle Foods Inc. (PF – Snapshot Report), The JM Smucker Company (SJM – Analyst Report) and The Hain Celestial Group Inc. (HAIN –Analyst Report). All these stocks carry a Zacks Rank #2.
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