Keurig Green Mountain (GMCR) Stock Sinks, Concerns Over K-Cup Sales
NEW YORK (TheStreet) -- Keurig Green Mountain (GMCR) stock is plunging 5.93% to $47.07 on heavy trading volume on Wednesday afternoon after analysts expressed concerns about declining K-Cup sales, Barron's reports.
Nielsen data shows K-Cup volumes were up 13.7% for the most recent 12-week period, compared with a 29.8% increase for the same period in 2014, SunTrust Robinson Humphrey analysts said, Barron's added.
"We continue to worry that the market is maturing faster than Keurig Green Mountain anticipated which could lead to excess brewer and K-Cup inventory at the end of the holiday season similar to last year," analysts noted.
Analysts were also concerned about the company's new KOLD beverage machine, because of the higher costs for the machine and pods.
"Overall, we remain skeptical about the prospects for KOLD especially at the current price points, but that is not a unique opinion among the investment community," analyst added, according to Barron's.
So far today, 3.62 million shares of Keurig Green Mountain have been traded, compared with its average daily volume of 2.61 million shares.
Separately, TheStreet Ratings team rates KEURIG GREEN MOUNTAIN INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
We rate KEURIG GREEN MOUNTAIN INC (GMCR) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, notable return on equity and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and feeble growth in the company's earnings per share.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- GMCR's debt-to-equity ratio is very low at 0.15 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.04, which illustrates the ability to avoid short-term cash problems.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Food Products industry and the overall market, KEURIG GREEN MOUNTAIN INC's return on equity exceeds that of both the industry average and the S&P 500.
- 42.75% is the gross profit margin for KEURIG GREEN MOUNTAIN INC which we consider to be strong. Regardless of GMCR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 11.71% trails the industry average.
- The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Food Products industry average. The net income has significantly decreased by 26.8% when compared to the same quarter one year ago, falling from $155.15 million to $113.62 million.
- Looking at the price performance of GMCR's shares over the past 12 months, there is not much good news to report: the stock is down 65.06%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier quarter. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, GMCR is still more expensive than most of the other companies in its industry.
- You can view the full analysis from the report here: GMCR
Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.