Keurig Green Mountain Inc. GMCR is set to report third-quarter fiscal 2015 results on Aug 5. Last quarter, the company delivered a negative earnings surprise of 1.90%.
The company has delivered mixed results for the past four quarters with negative surprises in two of the quarters and positive surprises in the remaining with an average positive earnings surprise of 6.54%.
Let's see how things are shaping up for the upcoming announcement.
Factors to Consider
Keurig Green Mountain has been witnessing lower sales in the portion pack category over the past few months. Additionally, the company’s much-hyped Keurig 2.0 brewer launched in Aug 2014 was not received well by consumers, mainly because of the high price tag. Also, the unlicensed pods that consumers have been using for so long are not compatible with this brewer. Moreover, Keurig 2.0 uses an interactive readability ‘lock-out technology’ that works only with licensed K-Cup pods.
All this made the newly launched Keurig 2.0 unattractive, thereby hurting sales of the portion pack category. The situation is not expected to improve in the third quarter as well
However, Keurig Green Mountain is trying hard to maintain its dominance in the single brewer category. The coffee maker entered into several strategic alliances during the third quarter to maintain the leading position in the single-serve brewing category which should drive results.
Keurig Green Mountain signed a multi-year manufacturing and distribution agreement with Laughing Man coffee brand during the third quarter. Per the deal, the company will make Laughing Man branded coffee available for its brewers.
Earnings Whispers
Our proven model does not conclusively show that Keurig Green Mountain is likely to beat earnings this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to surpass earnings estimates. However, that is not the case here due to the following factors:
Zacks ESP: ESP for Keurig Green Mountain is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 79 cents.
Zacks Rank: Keurig Green Mountain has a Zacks Rank #4 (Sell).
We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Stocks to Consider
Here are some other companies that investors may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
Campbell Soup Company CPB, with an Earnings ESP of +2.38% and a Zacks Rank #2 (Buy).
Dean Foods Company DF, with an Earnings ESP of +3.85% and a Zacks Rank #2.
Whitewave Foods Inc. WWAV, with an Earnings ESP of +4.00% and a Zacks Rank #2.
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