Analyst Antics at Green Mountain: Greenberg

Some things never change, and the analyst reactions to Green Mountain’searnings debacle prove it.


Here’s a company whose stock has plunged more than 30%, and analysts respond with nothing but praise:

“In our view,” wrote Janney Capital Markets analyst Mitchell Pinheiro, “GMCR’s outlook has never been better.”

Likewise, Cannacord’s Scott Van Winkle: “Bad time for a miss, great time for a buy.”

And then there is Roth’s Anton Brenner, who said simply: “A ridiculous market reaction.”

Yet the company said revenues missed internal estimates because “changes in ordering patterns in our grocery and club channels….”—an explanation that set off sirens in the world of skeptics.

“Smells like channel stuffing,” is the way Whitney Tilson of T2Partners—who is short Green Mountain – put it on Fast Money.

Not according to Green Mountain , which told analysts on its conference call that it’s usually reliable “predictive” modeling had failed—and that it simply had “overestimated what we anticipated primarily in the grocery and club channel” for K-Cups.

Pushed further, Marketing Vice President T.J. Whalen said attributed the changed ordering pattern buying ahead of price increases. “What that drove was heavier than expected ordering in Q3,” he said.

“Subsequently, a related expansion of customer inventories as they took in those heavier than expected orders. And then in Q4, they worked down through that inventory position to normalize it. And that's what caused a bit of a gap in terms of our order pattern.”

The analysts, no doubt, bought it hook, line and sinker, which is good for them: With plans to spend as much as $700 million this fiscal year, and with only $13 million in the bank and negative cash flow last quarter of $172 million, it would appear Green Mountain needs to raise cash.

For banking, companies usually turn to firms whose analyst have positive recommendations.

That likely leaves out Stifel Nicholas, whose analyst Mark Astrachan reiterated his longtime “sell” and made it clear he doesn’t buy the company’s explanation.

He thinks demand is slowing, and is clearly dubious. “The company has historically described itself as capacity-constrained yet inventories have grown faster than sales in five of the last six quarters.”

Clearly, it would appear, something isn’t quite right.

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