Ahead of the Bell: Green Mountain shares fall

May 3, 2012

NEW YORK (AP) — Shares of Green Mountain Coffee Roasters tumbled nearly 40 percent in premarket trading Thursday and were heading for new lows for the year on a disappointing outlook.

It has already been a rough year for the company, which makes single-cup coffee machines and the coffee to go with them. Two months ago, shares tumbled 20 percent after Starbucks announced plans to sell its own single-cup brewing machine, despite assurances from CEO Howard Schultz that the machine was targeting a different audience.

Less than eight months ago, Green Mountain shares were trading for twice what they are now.

The Vermont company reported a larger profit for its second quarter Wednesday, but CEO Lawrence Blanford also projected "a more moderated growth trajectory" for its Keurig coffee brewer and single-serve K-Cup pack sales.

Further out, Blanford said there is the potential for wider use of the company's coffee makers in U.S. households, and it appears most analysts agree, but investors took flight on the near term risks.

For the fiscal year 2012 ending in September, Green Mountain now expects adjusted earnings per share will range from $2.40 to $2.50, and net sales between $3.8 billion and $4 billion. That's short of analysts' forecast for $2.65 earnings per share on $4.27 billion in revenue.

Green Mountain had previously predicted adjusted earnings per share would range from $2.55 to $2.65, and net sales growth between 60 percent and 65 percent. Based on the $2.65 billion in revenue it reported for fiscal 2011, that would have worked out to between $4.24 billion and $4.37 billion.

For the current quarter, Green Mountain expects adjusted net income per share between 48 and 53 cents, and net sales from $881 million to $897 million. Wall Street had projected adjusted third-quarter earnings of 71 cents a share on $1.05 billion in revenue.

Most analysts stuck by the company, though they cut their price targets.

"Management's credibility is yet again under question," said Keybanc Capital Markets' Rohan Patkar. "We believe that (Green Mountain's) growth story is still largely intact, but believe that the stock's valuation reflects otherwise - based on a premarket share price indication of $30."

Shares of Green Mountain Coffee Roasters Inc. fell $19.62 to $29.90 in electronic trading before the opening bell.

Patkar slashed his price target from $80 to $45.