NEW YORK (TheStreet) -- Keurig Green Mountain (GMCR) shares are up 0.98% to $124.06 in market trading on Monday after the specialty coffeemaker announced that it will buy back about half of Italian coffee maker Luigi Lavazza SpA's stake in the company.
The company agreed to purchase 5.2 million of its shares back at a purchase price of $119.18 per share, a 3% discount on the stock's Friday closing price. The total purchase price is about $624 million.
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Lavazza had previously cut its stake in the company to 6.6% as of February 4 from 7.9% as of January 26, according to FOX Business.
The selloff is part of Lavazza's, the world's seventh largest coffeemaker, plan to fund its recent acquisitions. The company recently bid about $708 million for French coffee brands L'Or and Grand Mere.
As part of the terms of the sale Lavazza relinquishes pre-emptive rights on future issuances of the company's common stock.
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 multiple strengths, 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 largely solid financial position with reasonable debt levels by most measures and expanding profit margins. We feel these strengths outweigh the fact that the company shows weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- GMCR's debt-to-equity ratio is very low at 0.08 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, GMCR has a quick ratio of 1.64, which demonstrates the ability of the company to cover short-term liquidity needs.
- 37.89% is the gross profit margin for KEURIG GREEN MOUNTAIN INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 9.70% is above that of the industry average.
- KEURIG GREEN MOUNTAIN INC's earnings per share declined by 9.9% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth 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. This year, the market expects an improvement in earnings ($4.10 versus $3.74).
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 1.1%. Since the same quarter one year prior, revenues slightly dropped by 0.0%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- In its most recent trading session, GMCR has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
- You can view the full analysis from the report here: GMCR Ratings Report