Keurig Green Mountain (GMCR) EPS Upside from Margins, Not an Inflection Point - Cannacord

Canaccord Genuity analyst, Scott Van Winkle, notes the upside from Keurig Green Mountain (NASDAQ: GMCR) in the quarter but does not see a long term inflection point. Cost controls delivered some Q4 EPS upside while revenue metrics are generally consistent with expectations. However, he expects revenue to be relatively flat due to price. He can't recommend buying GMCR shares again until K-cup risk stabilizes, which would be greatly by a strong holiday brewer sales period.

Shares were pricing in a Q4 miss and significantly disappointing guide, the quarterly EPS upside and largely in-line F2016 guidance kicked off a relief rally that we expect will have some legs.

He doesn't expect confidence to leap higher, but cost controls and the strong cash flow should stabilize the shares after a rally on Thursday. The valuation remains modest and discounts risk.

He views the growth in the installed base as reasonable and forecast growth in brewer unit shipments in both Q1 and F2016. Lower brewer pricing and mix, however, lead to YOY dollar declines in our forecasts. We assume a more modest level of growth in K-cups than the installed base given continued weakness in the away from home channel that we believe is difficult to predict. While negative mix should begin to moderate, he assume 4% K-cup unit growth translates to flat revenue growth.

No change to Hold rating. The price target moves down to $55.00 (from $59.00).

For an analyst ratings summary and ratings history on Keurig Green Mountain click here. For more ratings news on Keurig Green Mountain click here.

Shares of Keurig Green Mountain closed at $40.50 yesterday.

You May Also Be Interested In

• Citi Upgrades United Microelectronics Corp (2303:TT) (UMC) to Buy 'with limited downside'
• UBS Downgrades Hino Motors Ltd. (7205:JP) (HINOY) to Neutral
• Owens Corning (OC) PT Raised to $172 at Evercore ISI