GMCR: Q4 2012 & FULL YEAR EARNINGS PREVIEW

Green Mountain Coffee Roasters is reporting earnings tomorrow after market close. Here are a few thoughts and questions on LST’s mind for tomorrow:

For the Quarter and Full Year:

• Will GMCR (finally) go cash flow positive this year? Will cash flow from operating activities turn positive for the full year (CFFO was NEGATIVE in 2010 and 2011, even though it looked breathtakingly positive through Q3)? Note they haven’t managed to go cash flow positive in their audited numbers, since before the Keurig acquisition in 06/07… and 08-11 was their boom years. Oh, and don’t bother about free cash flows… they already guided FCF as flattish.
• Will GMCR again mysteriously burn cash in Q4 in an amount that equals or exceeds the amount (supposedly) generated in Q1 + Q2 + Q3 combined this year? LST is surprised that no one has publicly pointed out that it did this in 2010 and 2011…SEE DIAGRAM BELOW SEEING IS BELIEVING
• How have the following impacted top-line volumes, and margins: Starbucks Verismo, Private Label Competition, K-cup Price Cutting / Brewer Rebates, Growth of Ekobrew and other Reusable K-cup filters, and introduction of competing All-In-One single serve brewers?
• Why is Larry Blanford leaving now? Wasn’t he supposed to leave later?

 

 

 

 

 

 

 

 

Guidance and Looking Forward:

• Will the new CEO Brian Kelley use this opportunity to clean house, clean up the accounting and related problems he is inheriting? Better to take the pain sooner than later… LST may send a letter to Kelley, offering suggestions, i.e. where the dead bodies may be buried.
• How will Costco Kirkland private label impact margins? Doesn’t it cannibalize?
• Are lower Keurig brewers on the horizon? Real technology companies cut prices on older generation products…but GMCR is really more of a packaging company.
• What are the competitive threats that the Starbucks Verismo and competing All-in-One single brewers pose to its existence, longer term?