We are upgrading Green Mountain Coffee Roasters’ (GMCR) stock from Neutral to Outperform on the back of impressive first quarter 2012 earnings results. First quarter earnings surged year over year by 233%. It also topped the Zacks Consensus Estimate by 66.7%. Strong holiday season coupled with huge success of Keurig Single-Cup Brewing System boosted sales during the quarter.
The company took advantage of the holiday season through effective marketing and aggressive promotions resulting in increasing awareness of the Keurig brand. Moreover, the company is encompassing more and more popular brands in the K cup packs so that the consumers have greater choice.
Green Mountain continues expanding new brand relationships and attracting new consumers. Our six-month target price of $81.00 per share equates to about 30.3x our earnings estimate for 2012. With zero annual cash dividend, the target price implies an expected total return of 19.8% over that period.
