Keurig Green Mountain (GMCR) Stock Still Falling on Soda Maker Criticism

NEW YORK (TheStreet) -- Shares of Keurig Green Mountain Inc. (GMCR) are down by 3.86% to $90.62 on heavy volume in late morning trading on Monday, as the stock continues to tumble from Friday when analysts criticized the specialty coffee and coffee maker business over the price of its make your own soda machine, "Kold," due out later this year.

Speaking with analysts last week, Keurig said it is expecting its retail cola maker to be sold at a price between $299 and $369, CNN Money reported, adding that in contrast SodaStream (SODA), which also sells a make your own cola machine, prices its least expensive model at only $79.

"Despite learning a fair amount about the system, in some respect there were still more questions than answers (particularly related to any modeling out of the financials). While we understand management may want to hold some cards close to its vest, a skeptic might say that management doesn't have great visibility into the near/mid-term trajectory of the system," Bernstein analyst Ali Dibadj said, Barron's reported.

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 a number of 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 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 10.8%. 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

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