Keurig Green Mountain Inc (NASDAQ:GMCR) released its earnings for the first three months of 2014 this afternoon after the market closed on Wall Street. The coffee machine seller showed earnings of $1.08 per share on revenue totaling $1.10 billion. On Wednesday’s market, shares in the company declined as the rest of the market suffered a wave of optimism. The firm’s stock finished the day trading at $92.21.
In the run up to the release of this afternoon’s earnings numbers analysts following Keurig Green Mountain Inc (NASDAQ:GMCR) were looking for the company to show sales of $1.05 billion in the first three months of the year. The quarter, which Green Mountain records as its second of the 2014 fiscal quarter, was expected to bring the company earnings of 94 cents per share.
ValueWalk's Raul Panganiban interviews Kirk Du Plessis, Founder and CEO of Option Alpha, and discuss Option Alpha and his general approach to investing. Q1 2021 hedge fund letters, conferences and more The following is a computer generated transcript and may contain some errors. Interview with Option Alpha's Kirk Du Plessis
Competition is king in 2014
Apart from the momentum problems that the market is pushing on companies like Keurig Green Mountain Inc (NASDAQ:GMCR), the company’s stock is facing a certain amount of compression as it faces more and more competition in the industry. Premium home coffee machines made the company’s name, quite literally in fact, but that market is not as easy as it once was, and Keurig may not have the competitive edge it needs.
More and more companies have entered into the market in the last year or so, and the company has released a new line of coffee makers in order to keep its margins at a high. The company’s core profit driving business, its sale of coffee making K-Cups and Vue Pods, is being eroded at the margin by the high price of coffee. The competition in the industry is reducing the space to increase prices on the back of that margin depletion.
Keurig Green Mountain waits for Coca Cola
The Coca-Cola Company (NYSE:KO)’s investment in 10% of the company earlier on in 2014 was the biggest impetus for the stock so far in 2014, and that change in ownership may have far-reaching consequences for the future of the company. If anything it was a major vote of approval for a company that had a rough exit from 2013.
The intentions of The Coca-Cola Company (NYSE:KO) are not truly known at this point. The company may just want a small amount of exposure to the home hot drinks market, or it may be considering a wider strategy in the market. Shareholders in Keurig Green Mountain Inc (NASDAQ:GMCR) are looking to the company, which is symbolically backed by investment powerhouse that is Warren Buffett, to guide the future of the company.
Keurig Green Mountain Inc (NASDAQ:GMCR) management will hold a conference call in order to discuss these earnings figures at 5 PM EDT. The company’s shareholders will want to hear more about the future of the company’s Keurig 2.0 project, the company’s guidance for the rest of 2014, and the company’s plans to deal with margin compression.