Keurig Analyst Sees Flat Core Growth, Share Value 'Stretched'

Keurig Green Mountain's (NASDAQ: GMCR) 20 percent gain in second-quarter income was helped a lot by lower coffee and selling costs, both of which are soon expected to reverse themselves, an analyst said Thursday.

Sales of the company's coffee and coffee makers grew six percent in the recent period. But the company forecast fourth-quarter earnings well below expectations.

Although shares spiked Thursday on the second-quarter results, Keurig neared the end of the session down more than 1.5 percent at $116.20 a share.

BTIG analyst Theo Brito is Neutral on Keurig and called its current share valuation "stretched." Brito said their "intrinsic value" is $60 to $70 a share.

Brito said although guidance suggests at least some earnings growth, that drops to zero "core growth" when one-time items, currency adjustments and the effect of share repurchases are factored out.

Revenue from brewing machine sales fell six percent although Brito believes this was because of discounting to clear inventory ahead of a new model launch.

Still, unit volume of the brewers grew only 13 percent, compared with expectations of 22 percent.