NEW YORK (TheStreet) -- Keurig Green Mountain (GMCR) stock is skyrocketing 72.98% to $89.43 this morning as an investor group led by Germany's JAB Holding will buy the beverage company for $13.9 billion.
Although Keurig had been contending with a bad inventory overhang after "screwing up" an iteration, the company posted a 2015 fourth quarter earnings beat, which took people by surprise, TheStreet's Jim Cramer said on CNBC's Squawk on the Street this morning.
"This was a household product that screwed up in iteration," Cramer stated. He pointed out that many people who were negative on the company had to rethink their position following the upbeat conference call.
Keurig currently has 21 million users, which is a "huge number of people," Cramer said.
He noted that supermarket chain Kroger (KR) admitted on its earnings call that it did not have high hopes for the coffee category, but Kroger acknowledged the segment has experienced significant growth recently due to innovation by Keurig and Starbucks (SBUX).
"A lot of people told me, 'I don't care, these guys are losers,' and I come back and say [CEO] 'Kelley has not impressed me as a loser,'" Cramer mentioned.
He added that Coca-Cola (KO) took a large stake in Keurig after the former Coke executive became head of Keurig. Coke invested $2 billion between February 2014 and February 2015 to take a 17% stake in Keurig as part of a 10-year deal to include its products in Keurig's KOLD cold-beverage brewer, the Wall Street Journal reports.
"The CEO of Coke took a big stake in this company when everyone thought it was a goner, and took a big stake in Monster (MNST) when people thought it was in trouble," Cramer stated. "Maybe he's a silent winner in going with this."
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 reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, a generally disappointing performance in the stock itself 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 0.17 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 1.10, 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.
- 41.94% 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 9.12% trails the industry average.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 60.05%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 29.06% compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- 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 32.9% when compared to the same quarter one year ago, falling from $141.06 million to $94.60 million.
- 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.