Momentum Play: Green Mountain Coffee Roasters

Green Mountain Coffee Roasters, Inc. (GMCR) is trading like a rock star, gapping higher once again after reporting strong Q2 results that handily beat expectations. With four consecutive earnings surprises and a bullish 23% growth projection, this Zacks #1 rank stock is all hopped up on momentum.

Company Description

Green Mountain Coffee Roasters, Inc. operates as a specialty coffee company in the US and internationally. The company was founded in 1981 and has a market cap of $10.75 million.

With earnings season in full force, we just got an update on Green Mountain’s business after the company reported excellent Q2 results that came in well ahead of expectations.

Second-Quarter Results

Revenue for the period more than doubled from last year, coming in at $648 million. Earnings also came in strong at 48 cents, 26% ahead of the Zacks Consensus Estimate, where the company now has an average earnings surprise of 12% over the last four quarters.

The awesome quarter was driven by continued strength in its K-Cup, the single cup of coffee brewing packet, where sales increased 94% from last year to $412 million.

Its Keurig brewer, used to brew the individual coffee packets, saw sales increase 86% to $116 million.

But anyone interested in GMCR needs to understand that the company currently has a patent on its K-Cups that is scheduled to expire next year.

Financial Profile

But in order to stay aggressive and grow its business, GMCR’s balance sheet has swollen, with total debt skyrocketing by $989 million to $1.059 billion against cash and short-term investments $64 million.

Estimates

We’ve already seen some solid movement in estimates off the good quarter, with the current year adding 25 cents to $1.47 while the next-year estimate tacked on 4 cents to $1.81, a bullish 23% growth projection.

Valuation

As a momentum high flyer, the valuation pictures looks a bit hot, with a forward P/E of 52X, a sharp premium to its peers and the overall market.

3-Month Chart

On the chart, GMCR jumped higher on the good quarter into a new all-time high. The valuation is hot right here, but so are shares. Take a look below.

About Michael Vodicka 49 Articles

Affiliation: Zacks Investment Research

Visit: Zacks Investment Research

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