Updated Research Report on Keurig Green Mountain - Analyst Blog
March 17 2014 - 9:47AM
Zacks
On Mar 14, 2014 we issued an updated research report on
Keurig Green Mountain Coffee Roasters Inc.
(GMCR).
The company changed its name from Green Mountain Coffee Roasters
earlier this month to highlight both its main brands – Green
Mountain coffee and Keurig brewers. However, Keurig Green Mountain
retained its ticker symbol “GMCR” on the NASDAQ stock exchange.
Keurig Green Mountain Coffee Roasters continues to be a leader
in specialty coffee and is recognized for its award-winning coffees
and innovative Keurig Single Cup brewing technology. Moreover, the
company plans to enter the water purification market in 2014. We
believe these steps will further boost its earnings in the coming
quarters
Additionally, the company is geared to enhance its Keurig
single-cup brewing system with new innovations and technology in
order to remain competitive, especially after its K-Cup patents
expired in Sep 2012. New models like Keurig Vue, Keurig Vue V600,
Rivo System have enabled it to maintain share in the single serve
category.
To maintain its dominance in the single-serve brewing category,
Keurig Green Mountain plans to launch Keurig 2.0 brewing machine in
fall 2014. The brewer has an interactive readability technology
that will work only with licensed pods. Keurig 2.0 is
expected to replace both K-Cup and Vue brewers at consumer-friendly
price points within a year of its launch.
Moreover, the company is stepping into the world of cold
beverage and soda with the launch of The Keurig Cold Machine in
2015. The new machine will make sodas, sports drinks and other
beverages at the touch of a button. Like its coffee machines, the
cold machine would use pods to make a variety of soft drinks.
The company entered into several strategic agreements with other
coffee and beverage companies like Starbucks Corp.
(SBUX), Unilever plc (UL), Eight O Clock,
Dunkin Brands Group Inc. (DNKN) to offer the
signature drinks of these companies in Keurig Green Mountain’s
K-cups and Vue packs. Such deals bolster the company’s goal of
sustaining its dominance in the single-serve brewing world.
In order to increase the brand power of its cold beverage
brewer, Keurig Cold, the company has inked a 10-year partnership
deal with the beverage giant The Coca Cola Company. Per the deal,
Keurig Green Mountain will exclusively make Coca-Cola branded pods
for use on its cold beverage system. Coca-Cola will also work with
Keurig Green Mountain on the development and launch of this latest
version of Keurig single-cup brewer. The strategic relationship
will aid the cold beverage product launch and provide it a strong
platform for global growth
However, Keurig Green Mountain’s revenues are highly dependent
on one-cup Keurig brew systems and the K-Cup coffee packages that
go with them. Moreover, slow job growth, high interest rates and
tightened credit availability continue to hurt consumer
discretionary spending. As a result, the consumer preference has
shifted toward low-priced products which can hurt the company’s
margins in the future. Also, we would like to see significant
top-line improvement before becoming more positive on the
stock.
Currently, Keurig Green Mountain Coffee Roasters has a Zacks
Rank #4 (Sell).
DUNKIN BRANDS (DNKN): Free Stock Analysis Report
KEURIG GREEN MT (GMCR): Free Stock Analysis Report
STARBUCKS CORP (SBUX): Free Stock Analysis Report
UNILEVER PLC (UL): Free Stock Analysis Report
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