Let the analyst wars begin.Following David Einhorn’s presentation on Green Mountain Coffee, SunTrust analyst Bill Chappell is firing back that nearly a third of the 100+ page presentation is off base.
Up first, is Einhorn’s EPS estimate of $3.50 a share. Chappell believes he double counted packaging costs — which would sharply reduce margins for the firm. Taking that away, earnings pop back up to $9.00.
He goes on to point that competitor penetration levels that Einhorn forecasts are statistically impossible.
But, perhaps where investors need most reassurance, SunTrust is unable to offer substantive guidance.
“We don’t doubt that there were shipping and inventory mishaps during GMCR’s early hyper‐growth
days, but we like to believe that GMCR has since addressed these issues,” Chappell writes.
He is referring to allegations that the company booked future profits in its second quarter, a serious violation of Generally Accepted Accounting Principles.
This could all backfire on the SunTrust analyst if it turns out Green Mountain committed fraud, especially after making it his top pick today.