Green Mountain Coffee (GMCR) Sharply Divides Investment Community, Again

Jacob Harper  |

Green Mountain Coffee Roasters (GMCR) The makers of the wildly popular single-serving coffee “K-Cups” posted fiscal fourth quarter earnings after the bell on Nov. 20, and the company beat both top and bottom line projections. However, famous short seller David Einhorn took aim at the company, outright calling Green Mountain a dying business and saying recent successful reports were due to the fact that the “books were cooked.”

This is not the first time EInhorn has taken aim at Green Mountain. In 2011, Einhorn took a massive short position on the company, and argued that both their reliance on a single, easily duplicated product and shady accounting practices would be its death knell. Green Mountain’s shares fell over 90 percent, although since then they have recuperated significantly.

Although Green Mountain rebounded, Einhorn has a solid track record of late when it comes to making shrewd short sales that pay handsomely. Einhorn shorted JC Penney ($JCP) early in their turnaround attempt and made off handsomely when he closed that position, calling it his most profitable transaction of 2012.

However, Einhorn’s short position on Green Mountain has been a real bomb, with the stock regaining much of the value lost in the 2011-12 plunge. Green Mountain is up over 70 percent on the year.

It could be argued that Einhorn’s most recent bearish comments are influenced by his increasingly poor position on Green Mountain, and the company’s continuing strong numbers. Net income jumped 35 percent in the fourth quarter as revenue topped $1 billion.

For their fourth fiscal quarter earnings report, Green Mountain reported a net profit of $136 million, or $0.89 per share, versus the net profit of $101 million, or $0.64 per share, from the same period a year ago. Revenue for the quarter was $1.047 billion, as compared to $946.7 million from the same quarter the previous year. Analysts were expecting a net profit of $0.75 per share on revenues of $965 million.

Investors shrugged off Einhorn’s doom and gloom and accusations, and seemed to pay more attention to the reported earnings beat. Shares of Green Mountain shot up 14.7 percent by midday to hit $70.98 a share.

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