Brewing Technology Drives Keurig Hype While Coffee Delivers Revenue Growth

May 7 2014, 3:56pm CDT | by

Keurig Green Mountain brewed an earnings beat thanks to strong coffee pod sales.

Keurig — previously Green Mountain Coffee Roasters — reported $1.1 billion in second quarter revenue, up 10% from the same period a year ago. Net income came in at $162.1 million, up 22%. At $1.03, earnings per share were 9 cents ahead of Wall Street analysts’ consensus estimate. The beat sent shares up more than 7% in after hours trading Wednesday to about $98.80.

“Double digit sales and earnings growth on the heels of a strong holiday season demonstrates the continued opportunity to grow our Keurig system in North America in a very competitive environment,” said CEO Brian Kelley in a statement on the results. “During the quarter, we drove strong brewer and portion pack net sales and accelerated our installed base. In addition, disciplined cost controls drove operating profit and margin growth that translated into solid earnings and a significant increase in free cash flow.”

Interest in the company has grown in recent months after the coffee company — known for it’s single serve brewing machines — announced it had partnered with Coca-Cola to develop the Keurig Cold. Soon consumers will be able to make their favorite Coke beverages at home. As of the closing bell Wednesday Keurig shares were up 27.7% year-to-date.

“Short term, we are focused on successfully introducing our Keurig 2.0 hot system; adding a number of additional brands as new Keurig partners; and, preparing for the launch of our Keurig cold system in fiscal year 2015. Longer term, continued investment in innovation across all facets of our business – from new product development to merchandising – will power a robust pipeline of new products, drive financial performance and fuel continued consumer passion for the Keurig brand,” said Kelley. The Keurig 2.0 will allow coffee lovers to brew both single cups and larger quantities of java.

While new technology is keeping excitement high, sales of specialized sized coffee pods are driving revenue growth. So called portion packs accounted for $898.2 million in sales, or 81% of the company total, up 13% from last year. Brewers and accessories brought in $137.6 million in sales, up 9%. While brewer sale volume was up, prices were lower.

Looking ahead, Keurig expects revenue to grow in the high single digits in 2014. The company expects full year non-GAAP earnings per share to come in between $3.63 and $3.73.


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