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.
Van Winkle pointed out that a National Coffee Association survey showed 81% of respondents' impression of single-serve coffee to be favorable, with purchase intent rising.
That bodes well for Green Mountain and its growing roster of available K-Cup options, as brands like
Swiss Miss, Newman's Own and
Celestial Seasonings tea offer brewing pods for the system, among others.
"Dunkin' advertising support is the unappreciated asset and Starbucks' 'on-time' launch should add to holiday momentum," Van Winkle added.
Earlier this year, the analyst raised his market share expectations for Keurig from 15% to 25% and then to 30%, but said he saw the one-cup brewer garnering upwards of 40% market penetration "given the strong line-up of brands available and further innovation lying ahead."
>> Starbucks, Green Mountain: K-Cup Deal
Shares of Green Mountain are up more than 180% year to date, and more than 240% from a year ago. The stock was rising 2.1% in premarket trading Monday after closing higher Friday at $92.06.
Written by Miriam Marcus Reimer in New York.
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