Keurig Green Mountain Inc. (GMCR, Financial) specializes in the production and sale of specially created coffee, coffeemakers, teas and various other beverages. Keurig Green Mountain Inc is responsible for selling creating and producing coffee, hot cocoa, teas and various beverages under brands like Rivo, Bolt, Vue and K-Cup. The company also sells whole bean and ground coffee in specialized packaging and cans.
Keurig Green Mountain Inc. reported non-GAAP EPS of $1.03 a share based on net sales of $1.127 billion. This earnings growth was an increase of 2% year-over-year. Analysts were targeting an EPS of $1.05 a share on total sales of $1.15 billion for Keurig Green Mountain Inc.’s second quarter of their fiscal year. The same quarter last year saw the coffee specialist post an EPS of $1.08 a share on $1.1 billion in revenue.
The company’s GAAP EPS was $0.97 a share which indicated a decline of 6% from the previous year. After selling $106.4 million of brewers and accessories, Keurig Green Mountain Inc. recorded a 23% drop in product saes year-over-year. The coffee specialist reported sales of pods worth $956.6 million which was a rise of 7% year over year.
Words from above
According to Brian Kelley, CEO -‘With any new product introduction, there are always challenges that are front-end loaded. And our transition to 2.0 was particularly complex. Point of sales results were not as strong as anticipated, which led to higher levels of brewer inventory at retail and on our balance sheet. Some of this was due to consumer confusion around pod compatibility, which we've mentioned in the past. Although we're seeing improvement as we transition more formally unlicensed brands into our manufacturing system. Our second challenge has been the inability to address key entry level brewer price points. And third, customer feedback suggests we should reintroduce the My K-Cup accessory and enhance some brewer features. Turning to pods, volume in the measured channels continues to be healthy at 17% category growth in the quarter, according to IRI. However, we saw weakness in several unmeasured channels, including the specialty channels, digital, and Dunkin' Donuts retail stores. Which reduced total system category growth to the low teens.’
Analysis
Keurig’s Green Mountain Inc.’s gross profit margin for the second quarter of its fiscal year 2015 is essentially unchanged as compared to the same period year-over-year. Even with increased sales, the company’s net income has dropped. The company has average liquidity and its quick ratio of 1.12 currently shows technically this company has the ability to cover short-term cash demands.
In this quarter, stockholders’ net worth has fallen by 17.75% from the same quarter 12 months ago. Combined, the key liquidity measures show it is relatively unlikely Keurig Green Mountain Inc. will face financial problems anywhere in the near future.
Analysts are giving Keurig Green Mountain Inc a BUY rating after studying the company’s various strengths that will outweigh the impact of its weaknesses. Keurig Green Mountain Inc’s strengths are its revenue growth, fairly solid financial position and manageable debt levels, a decent return on equity, gradually increasing profit margins and reasonable levels of valuation. The company’s only real weakness is its weak operating cash flow. So, investors could possibly treat the stock as an investment-likely proposition.
