Cannacord Genuity analyst Scott Van Winkle reiterated his buy rating on Green Mountain shares and $120 price target ahead of the Vermont coffee maker's fourth-quarter earnings, due to be released on Oct. 26, according to Yahoo's earnings calendar.
"We think the shares reflect the tremendous growth and validation of GMCR's market dominance," Van Winkle said.Green Mountain is crushing the one-cup coffee brewing market thanks to the surging popularity of its Keurig single-serve brewing machine and accompanying K-Cup portion packs. In Green Mountain's recent third quarter, K-Cup sales surged 136% to $485 million, while Keurig brewer and accessory sales soared 66% to $105 million. The company sold 1.1 million Keurig machines in the period.
"We expect several years of rapid growth, driven by rising penetration of Keurig single-cup coffee makers in coffee-drinking households that should drive higher revenue growth and even higher rates of earnings growth as the margin story unfolds," Van Winkle noted. For the fourth quarter, the analyst expects Green Mountain to have earned 48 cents a share, excluding amortization, up from 24 cents a year earlier. He forecast quarterly revenue growth of 102% to $753.7 million, with brewer shipment growth in units up to 1.8 million from 1.2 million in the fourth quarter a year ago. Analysts polled by Thomson Reuters also expect Green Mountain to book a fourth-quarter profit of 48 cents a share, and the consensus called for even stronger revenue of $761.4 million.