Green Mountain Coffee Roasters (NASDAQ: GMCR) has already soared an imposing 95% growth year-to-date. Despite the high jump, there is still some upside for shares to reach the 100% mark and beyond. Green Mountain Coffee Roasters is a leading specialty coffee and coffeemaker that is well-known for its award winning innovation, which is the Keurig brewing technology. This technology has significantly changed the way North Americans drink and enjoy their coffee at home and in the office.
Robust third quarter results
The year-to-date jump of Green Mountain Coffee was supported by robust financial health. During the third quarter, the company reported improved net earnings at $967.1 million, up 11% from $869.2 million a year ago. Both GAAP and non-GAAP operating income also jumped 49% and 43%, respectively.
But the main highlight of the report was the GAAP net income, which improved by an impressive 59%. Non-GAAP net income also jumped 50% versus the year-ago quarter. GAAP and non-GAAP diluted net income per share grew 65% and 58%, respectively.
Moreover, the company reported remarkably improved cash flow. Its balance sheet is healthy, as well. This reflects the company's efficient management of its operation. Cash and cash equivalents grew 137% over the same period of last year, while it effectively reduced its debt outstanding and capital lease and financing obligations by 22% from $409 million to $317 million. Similarly, its 39-week free cash flow improved to $581 million, up 218% over last year. This will give the company enough room for expansion and further innovations.
Green Mountain Coffee Roasters recently announced that it will consolidate its production in Canada to its facility in Montreal. Consequently, it will also close down its Toronto facility, which lacks the potential to expand and grow. This will lead to a lay-off of about 120 employees. But the company will provide due assistance to the affected employees by giving them outplacement services, and by assisting them in the transition process.
While the closure of its facility in Toronto will shrink its global footprint, the management expects that the impact to the fiscal year 2013 results will be minimal. So far, the company's guidance for the year remains unchanged despite the expected one-time pre-tax charge due to the closure of its Toronto facility that may be applied in the fourth quarter.
There is high chance for the management to raise its guidance considering that there are many growth catalysts that will potentially sustain the rally towards the year's end. The company is very aggressive in its partnership venture by establishing alliances with key partners. The most recent partnerships are listed below:
Key partnerships for growth
King of latte
Since March 2011, Green Mountain Coffee and Starbucks (NASDAQ: SBUX) have successfully partnered to grow each other's business. During this time, there were more than 860 million K-cup packs of Starbucks coffee sold. This further pushed the revenue of Green Mountain up.
On May 2013, Starbucks and Green Mountain Coffee announced that they have agreed to extend their harmonious partnership for 5 more years. As part of the agreement, both companies will triple the numbers of branded items of Starbucks made for Keurig single-serve machines. Aside from that, other brands will be added to the Keurig list that includes Starbucks coffee, Torrefazione Italia coffee, and Seattle's Best coffee.
Starbucks' CEO, Howard Schultz, mentioned that both companies will work hand-in-hand to market the Keurig system and Starbucks K-Cups. The partnership is crucial in sustaining the future growth of Green Mountain Coffee in the next five years.
Soup in the Keurig Brewers
Just recently, Green Mountain Coffee forged another partnership with Campbell Soup Company (NYSE: CPB), the number one soup brand in the U.S. in terms of dollar sales. Campbell's fresh-brewed soup K-Cup will be added to the Keurig brewer system in order to cater to the growing snacking needs of the U.S. consumers.
More consumers today are also looking for mini-meals during snacks, and the fresh-brewed soup of Campbell is just perfect for snack time. In United States, snacking is a rising behavior with more than half of the consumers snacking many times in a day. The partnership is just right in time for Green Mountain Coffee to take a hitch ride with the growing demand for mini-meals for snacking.
Top cinnamon brand
On July 25, Green Mountain Coffee and Cinnabon agreed to bring Cinnabon's bakery-inspired coffee to K-Cup packs. This will be added to the Keurig single cup brewing system and it will be made available to all participating Cinnabon bakery outlets and retail channels. It will also be offered in GMCR websites. Cinnabon's coffee in K-Cup packs is expected to be available in the Keurig brewing system by spring of 2014.
The bottom line
While the current rally that is now approaching the 100% mark creates rising tension for possible correction, Green Mountain Coffee still possesses the upside potential to maintain its upbeat trend towards the end of the year and beyond. Its alliances with key partners will help sustain its growth, while the company continues to seek newer partners.