NEW YORK (TheStreet) -- Shares of Keurig Green Mountain (GMCR) are dropping 3.59% to $71.66 after SunTrust Robinson Humphrey cut its price target to $70 from $95 while maintaining its "neutral" rating.
The decline is due to loss of market share to Starbucks (SBUX) - Get Starbucks Corporation Report, Kraft Foods Group (KRFT) , and J.M. Smucker (SJM) - Get J.M. Smucker Company (SJM) Report, Barron's reported.
"In our opinion, Keurig Green Mountain will need to address the share losses for its company-owned brands sooner than later, which will likely put pressure on earnings," SunTrust Robinson Humphrey analysts said.
The firm's concern is the potential dilution from the product that whether the company can cut the cost to manufacture by 30% to 50% so that it does not become highly dilutive at those lower price points, SunTrust Robinson Humphrey noted.
Keurig Green Mountain is a specialty coffee and coffeemaker businesses in the U.S. and Canada that sells Keurig Single Cup Brewers, Arabica bean coffees and offers traditional whole bean and ground coffee in other package types.
Separately, TheStreet Ratings team rates KEURIG GREEN MOUNTAIN INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate KEURIG GREEN MOUNTAIN INC (GMCR) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity and expanding profit margins. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 11.3%. Since the same quarter one year prior, revenues slightly increased by 2.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- GMCR's debt-to-equity ratio is very low at 0.20 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 1.12, which illustrates the ability to avoid short-term cash problems.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. 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.
- 46.36% 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, GMCR's net profit margin of 13.79% compares favorably to the industry average.
- KEURIG GREEN MOUNTAIN INC's earnings per share declined by 5.8% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, KEURIG GREEN MOUNTAIN INC increased its bottom line by earning $3.74 versus $3.16 in the prior year. For the next year, the market is expecting a contraction of 1.1% in earnings ($3.70 versus $3.74).
- You can view the full analysis from the report here: GMCR Ratings Report