Green Mountain Surges on Outlook

(Green Mountain earnings report updated with details of improved profit guidance and secondary offering.)
WATERBURY, Vt. ( TheStreet) -- Green Mountain Coffee Roasters ( GMCR) shares surged Wednesday after the company raised its full-year outlook and beats quarterly profit expectations.

Green Mountain Coffee

After the closing bell Tuesday Green Mountain said growing margins, despite soaring coffee bean costs, led it to raise its outlook.


The leader in the single-serve coffee market through the success of its Keurig brewing system, earned $65.4 million, or 48 cents per share on an adjusted basis, in its fiscal second quarter, up nearly 300% from a year-earlier profit of $24.1 million, or 17 cents per share.

Revenue more than doubled to $647.7 million.

Analysts had called for Green Mountain to earn 38 cents a share on revenue of $629.4 million.

The stock surged 18.6% to close at $75.98 Wednesday afternoon.

Green Mountain now expects to earn between $1.43 and $1.50 per share this fiscal year, higher than analysts' call for $1.23 per share and above the company's prior guidance for a profit of $1.19 to $1.29 per share.


Green Mountain says it expects the popularity of its Keurig one-cup brewing system to continue growing at a steady clip in the U.S., especially as brands like Dunkin' Donuts , Starbucks ( SBUX) and ConAgra's ( CAG) Swiss Miss offer brewing pods for the system.

"We believe healthy post-holiday in-store brewer inventory levels and positive word of mouth from enthusiastic Keurig owners combined to help drive a very strong fiscal second quarter for Green Mountain Coffee Roasters," said CEO Lawrence J. Blanford.

Green Mountain added that it will sell 7.1 million shares in a secondary public offering, and shareholders will unload 403,883 shares. Proceeds from the sale will be used to pay down the company's debt and for general corporate purposes.

Coffee shop giant Starbucks beat quarterly expectations last week but offered weaker-than-expected 2011 profit guidance.

Peet's Coffee & Tea ( PEET) posted a 77.4% jump in quarterly earnings to $5.5 million, or 41 cents per share, after the bell Tuesday. Revenue rose 9% to $88.5 million.

Peet's lowered its guidance by 10 cents per share as coffee prices skyrocketed, saying it now expects to earn between $1.43 and $1.50 per share, though revenue should rise 8% to 10%.


Investors looked to Starbucks' report for word on whether its financial performance had been pressured by rising commodity and raw material costs. Cost of sales in the recent quarter jumped 10.9% year-over-year to $1.18 billion, or 51.5% of total revenue, compared with costs of $1.06 billion, or 49.8% of total revenue, in the year-earlier period.

In December CEO Howard Schultz called the 50% spike in coffee futures "tragic," blaming financial speculators for the run-up in prices.

Later this year Starbucks and Tazo tea-branded K-Cup single-serve pods will be available for Green Mountain's popular Keurig machines .

As part of its deal with Green Mountain, Starbucks will sell the Keurig machines in its stores and through specialty retailers as early as 2012. Starbucks expects the deal to generate around $1 billion.

-- Written by Miriam Marcus Reimer in New York.

>To contact the writer of this article, click here: Miriam Reimer.

>To follow the writer on Twitter, go to http://twitter.com/miriamsmarket.

>To submit a news tip, send an email to: tips@thestreet.com.

READERS ALSO LIKE:




>>See our new stock quote page.

Get more stock ideas and investing advice on our sister site, Stockpickr.com.
Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.