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The share price for Green Mountain Coffee Roasters, Inc. (GMCR) had increased 6.73% to $39.34 on Monday from $36.86 as reported in our last article on GMCR, published on Nov. 29, 2012. The reviewed credit put spread is currently yielding 8.17% return on margin, and our bullish view remains for GMCR.

Analysts' Calls and Earnings Estimates

On Jan. 11, 2013, William Chappel Jr. of SunTrust Robinson Humphrey increased GMCR's price target to $50 from $45, indicating that the company does not need to worry too much yet about new competition for its K-Cups. As reported, "The analyst said that Kraft looks to be the toughest rival, due to its well-known Maxwell House brand and strong retail relationships. While investors worried that Kraft might substantially discount its products, Chappell said that so far the price per K-Cup from Kraft - which currently has 12-count boxes - is the same as Green Mountain and Folgers Select brands. The analyst noted that private label K-Cups are being sold at a cheaper price than their branded counterparts, but that the price difference between the two is actually much smaller than what is normally seen when comparing private label and branded products." The analyst believes there is a long-term opportunity for private label K-Cups and expects a slow build in 2013.

On Dec. 12, 2012, analysts at Janney Montgomery Scott set a $41.00 price target on GMCR with a neutral rating. On Dec. 6, 2012, analysts at KeyBanc raised their price target on GMCR to $55.00 from $45.00 with a buy rating. Lastly, analysts at Williams Capital raised their price target on GMCR to $46.00 from $40.00 in a research note to investors on Dec. 4, 2012.

Analysts, on average, are expecting an EPS of $0.65 with revenue of $1.33B for the current quarter ending in December, 2012. Analysts are estimating an EPS of $2.69 with revenue of $4.51B for the fiscal 2013, ending in September 2013. For 2014, analysts are projecting an EPS of $3.07 with revenue of $5.08B, which is 12.80% higher than fiscal 2013, as seen from the table below.

(click to enlarge)

Source: Yahoo! Finance

Key Stats and Valuation

GMCR has an enterprise value of $6.60B and a market cap of $5.84B. GMCR has a total cash of $58.29M with a total debt of $540.54M. GMCR has a book value of $14.81. GMCR has an operating cash flow of $477.79M with a levered free cash flow of $46.47M. By using Morningstar's data, GMCR's key stats will be compared to its peers in the industry of packaged foods, including Starbucks Corporation (SBUX), Hillshire Brands Co (HSH) and Caribou Coffee Company, Inc. (CBOU). GMCR has higher revenue growth (3 year average) of 70.0, which is higher than the industry average of -11.2. GMCR has higher operating margin of 14.7%, ttm, and net margin of 9.4%, ttm, as compared to the industry averages of 8.4% and 5.0%, ttm, respectively. GMCR has a higher ROE of 17.4, comparing to the average of 12.4.

GMCR has P/E of 17.2, which is higher than the industry average of 16.6 but lower than GMCR's 5 year average of 39.6. GMCR's P/B of 2.6 is lower than the industry average of 3.5 and GMCR's 5 year average of 4.6. GMCR has a forward P/E of 10.2, which is lower than S&P 500's average of 13.3. GMCR has a PEG ratio of 0.5.

Technical Analysis

GMCR closed at $39.34 with 4.58% loss on Monday. GMCR had been trading in the range of $17.11-$71.15 in the past 52 weeks. GMCR has a beta of 0.99. The MACD (12, 26, 9) indicator is showing a bearish trend but the MACD Histogram did not change on Monday. The momentum indicator, RSI (14), is close to neutral at 50.39. GMCR is currently trading above its 50-day MA of $35.00 and 200-day MA of $29.11. The next resistance is $43.67, the R1 pivot point, followed by $46.01, the R2 pivot point, as seen from the chart below.

(click to enlarge)

Source: StockCharts.com

Options Strategy

While our long-term view remains bullish for GMCR, our previous credit put spread position will be maintained until the expiration date.

  • Short 1x March 16, 2013 Put at the strike price of $25
  • Buy 1x March 16, 2013 Put at the strike price of $22

For new bullish investors, we will review a longer-term credit put spread, which will allow investors to acquire the stock at a lower entry price while gaining some upside potentials.

  • Short 1x June 22, 2013 put at the strike price of $29 for the credit of $2.06
  • Buy 1x June 22, 2013 put at the strike price of $27 for the cost of $1.29

The maximum profit is $0.77, and the maximum risk/margin requirement is $1.23 ($2 loss - $0.77 credit received). If GMCR closes above $29.00 on June 22, 2013, 62.60% return on margin will be gained. If GMCR falls below $29.00, GMCR stock will be acquired at $28.23, which is 28.24% lower than Monday's closing price of $39.34.

Note: Put prices are quoted at the time of writing on January 15, 2013. All other prices are quoted from the closing of January 14, 2013. All calculations are before fees and expenses. Investors and traders are recommended to do their own due diligence and research before making any trading/investing decisions.

Source: Green Mountain Coffee Roasters Stays Green