* 2nd-qtr EPS $0.93 ex items tops Wall Street view of
* Raises FY '13 outlook for the second time
* Expands K-Cup partnership with Starbucks
* Shares rise 16 pct after hours
By Martinne Geller
May 8 Green Mountain Coffee Roasters Inc
, maker of Keurig single-serve brewers and K-Cups,
raised its full-year earnings outlook on Wednesday after a
better-than-expected second quarter and said it had expanded its
relationship with Starbucks Corp, sending its shares up
almost 16 percent after hours.
The new 5-year agreement, which replaces one first signed in
2011, triples the number of Starbucks drinks to be sold in
K-Cups with the addition of Seattle's Best and Torrefazione
Italia coffees, Teavana teas and Starbucks cocoa.
It also ends speculation that Starbucks might walk away from
their partnership following the expiration of certain Green
Mountain patents and the launch of Starbucks' own single-serve
brewer of espresso drinks.
"Starbucks is the largest coffee brand out there. Them
coming and saying 'we want a long-term deal with you' is a very
good thing for our system," Brian Kelley, Green Mountain's chief
executive, told Reuters. "This certainly puts away any fear that
the Keurig system isn't the winning system."
The exact expiration date of the prior agreement is not
known, but it was slated to last at least through most of 2014.
The new agreement is for at least five years, starting now.
"The Starbucks deal changes the conversation to longer-term
opportunities," said Marc Riddick, an analyst with The Williams
Capital Group. "It further confirms our belief that K-Cups are a
growth driver for many strong companies, not just Green
Starbucks shares rose nearly 1 percent after hours.
Green Mountain's net income was $132.4 million, or 87 cents
per share, in its fiscal second quarter ended on March 30, up
from $93.0 million, or 58 cents per share, a year earlier.
Excluding certain costs, earnings were 93 cents per share.
On that basis, analysts, on average, had been expecting 74 cents
per share, according to Thomson Reuters I/B/E/S.
Net sales rose 14 percent to $1.00 billion, as a 21 percent
increase in K-Cups offset a 10 percent decline in sales of
brewers and accessories.
Green Mountain sells its brewers virtually at cost to fuel
adoption of its system. It makes the vast majority of its
profits from the K-Cups.
Last year, certain of the company's design patents expired,
inviting a host of private-label competitors and raising
concerns among investors that an erosion of its dominant market
share would hurt its pricing power and margins.
For the current third quarter, Green Mountain said it
expects earnings of 71 cents to 78 cents per share and net sales
growth of 11 percent to 15 percent.
For the full year, it now expects earnings of $3.05 to $3.15
per share, excluding items, and net sales growth of 11 percent
to 14 percent.
It had previously forecast earnings of $2.72 to $2.82 per
share on net sales growth of 15 percent to 20 percent. The
company said the lower sales growth is due largely to the
shrinking of its more traditional bagged coffee business, which
is being replaced by its single-serve Keurig business.
Green Mountain shares rose $9.66, or 16.2 percent, to $69.14
in after-hours trade.