Green Mountain Coffee Roasters Inc. surged the most in more than 20 months after the maker of Keurig brewers and single-serve pods said fiscal fourth-quarter profit rose because of higher K-Cup sales.
The shares (GMCR:US) rose 27 percent to $36.86 at the close in New York for the biggest gain since March 10, 2011. Green Mountain has fallen 18 percent this year.
Net income (GMCR:US) in the three months ended Sept. 29 increased 22 percent to $91.9 million, or 58 cents a share, from $75.4 million, or 47 cents, a year earlier, the Waterbury, Vermont- based company said yesterday in a statement. Excluding certain items, profit was 64 cents a share. Analysts projected 48 cents, the average of nine estimates compiled by Bloomberg.
Chief Executive Officer Lawrence Blanford has sought to boost sales with a new Keurig machine that makes milk-based drinks. Blanford also developed an espresso maker with Luigi Lavazza SpA that went on sale in time for the holidays. Earlier this month, the company said Coca-Cola Co. (KO:US) executive Brian Kelley will take over for Blanford as CEO on Dec. 3.
“Their momentum is still there with the business model,” Matthew DiFrisco, a New York-based analyst at Lazard Capital Markets, said in a telephone interview. It’s a good time for Kelley to take over, and his experience with bottling and food and drug retailers will be an asset for Green Mountain, he said.
Revenue advanced 33 percent to $946.7 million in the quarter. Analysts projected $904.7 million, on average.
The company raised its forecast for fiscal 2013 profit, excluding some items, to as much as $2.74 a share from as much as $2.65. Analysts estimate $2.49, on average.
The company is continuing to add more K-Cup licensees, and no single partner or non-owned brand makes up more than 6 percent of Green Mountain’s net sales, Blanford said yesterday on a conference call.
“Our business is not dependent on any one partner brand,” he said.
Sales of K-Cups rose 47 percent to $700.2 million in the quarter. Brewer and accessory sales increased 30 percent to $150.1 million.
Green Mountain this year introduced the Vue machine, which makes lattes and cappuccinos, and also the Rivo brewer to help it compete with Nestle SA (NESN)’s Nespresso makers and increase capsule sales. Earlier this month, Green Mountain said that it will make single-serve cups for club retailer Costco Wholesale Corp. (COST:US) in varieties including Breakfast Blend and Pacific Bold.
The company has been facing competition from grocery stores making private-label capsules that fit into Keurig machines and also from Starbucks Corp. (SBUX:US), which recently began selling its own single-serve coffee maker, the Verismo. A 12-pack of Verismo Christmas Blend pods are $12.95, compared with $19.95 for a 24- pack of Starbucks House Blend K-Cups.
Hedge fund manager David Einhorn said in March that the Starbucks Verismo brewer “is part of the competitive onslaught hitting Green Mountain.” Green Mountain’s main patents for its K-Cups were set to expire in September, paving the way for private labels and other rivals to enter the single-serve beverage market. Einhorn also has criticized Green Mountain for its accounting practices and lack of transparency.
The company is the subject of a U.S. Securities and Exchange Commission investigation about how it recognizes revenue, disclosed in September 2010. Two months later, the company restated earnings for fiscal years 2007, 2008 and 2009 and some of 2010 after finding accounting errors including an overstatement of pretax income, according to a statement.
“We are cooperating fully with the SEC staff’s inquiry,” Green Mountain said in a filing today.
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