Green Mountain Profit Jumps 38% as Sales Rise

Green Mountain Coffee Roaster Inc.'s (GMCR) fiscal fourth-quarter profit jumped 38% due to higher sales of the company's single-serve coffee packs and robust demand for its Keurig brewers.

Results for the latest period were mixed, as profit growth exceeded expectations though sales growth was at the low end of the coffee company's expectations.

Shares fell 2.2% to $60.47 in after-hours trading, as Green Mountain's sales outlook commentary was also lighter than analysts expected.

Green Mountain has been the dominant player in the single-serve coffee industry, deriving nearly all of its revenue from Keurig brewers, accessories and K-Cup coffee and tea packs. But the company is facing increased competition from other brewers, such as Starbucks Corp.'s (SBUX) single-serve machine, and off-brand K-Cups that have emerged since the expiration of some of its patents.

The company has sought to improve its manufacturing and marketing, as well as create new brewing machines and expand geographically to drive future growth.

For the quarter ended Sept. 28, Green Mountain reported a profit of $127 million, or 83 cents a share, up from $91.9 million, or 58 cents a share, a year earlier. Excluding expenses tied to a Securities and Exchange Commission inquiry and other items, adjusted profit grew to 89 cents from 64 cents a share.

Net sales grew 11% to $1.05 billion.

In August, Green Mountain forecast a profit of 69 cents to 74 cents on sales growth of 11% to 15%.

Gross margin widened to 36% from 33.4%.

Sales of single-serve packs climbed 11% to $777.9 million, while sales of brewers and accessories jumped 27%.

For the new fiscal year, Green Mountain sees per-share adjusted earnings between $3.75 to $3.85 on sales growth in the high single-digits. Analysts surveyed by Thomson Reuters had projected $3.78 in per-share earnings on 10% sales growth.

Green Mountain said it expects sales growth will be stronger in the back half of the new fiscal year, as a number of currently unlicensed packs are transitioned to licensed partners.

Green Mountain also issued current-quarter earnings guidance between 85 cents to 90 cents a share, with sales expected to rise in the low-to-mid single digits. Analysts expected a profit of 96 cents and 7% sales growth.

On Wednesday, the company also disclosed its board approved a new stock buyback authorization worth up to $1 billion. The new program will take effect after a current buyback program with $138 million in remaining authorization is completed.

Write to John Kell at [e-mail]

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