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Dr Pepper Snapple (DPS) Beats on Q3 Earnings; Raises View

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Plano, TX-based Dr Pepper Snapple Group Inc. reported strong third-quarter 2016 results, surpassing the Zacks Consensus Estimate for both earnings and sales for the five quarter in a row. In addition, the company raised its guidance for full-year 2016 and also expects to return over $1 billion to shareholders in the form of dividends and share repurchases.

Earnings in Details

Third-quarter adjusted earnings per share (EPS) of $1.17 beat the Zacks Consensus Estimate of $1.11 by 5.4%. Moreover, earnings increased 8% year over year, courtesy of strong top-line and margin expansion.

Revenues and Margins

Dr Pepper Snapple’s net sales of $1.680 billion were ahead of the Zacks Consensus Estimate of $1.659 million by 1.3%. Net sales rose 3.1% year over year as favorable product/package mix, price hikes and sales volume offset currency headwinds.

While sales were driven by 1% volume growth, currency hurt sales by 1%.

Segment-wise, the company generated higher revenues in Beverage Concentrates (up 4.9% year over year) and Packaged Beverages (3.6%) segments, while Latin America Beverages segment revenues dropped 6.2% in the quarter.

Adjusted operating income of $364 million increased 5% year over year. Adjusted operating margin increased 40 basis points (bps) to 21.7% driven by higher sales and productivity improvements.

Volume Details

Dr Pepper Snapple’s sales volume is measured in two ways: 1) sales volume and 2) bottler case sales (BCS) volume. Sales volume represents concentrates and finished beverages sold to bottlers, retailers and distributors. BCS includes the sale of finished packaged beverages by the company and its bottlers to retailers and independent distributors.

Sales volume increased 1% in the quarter.

In the quarter, BCS volume went up 2%, higher than the 1% increase in the previous quarter. During the quarter, Carbonated Soft Drinks (CSDs) volume increased 2% and non-carbonated beverages (NCBs) volumes remained flat.

Geographically, the U.S. and Canada volumes grew 1%, better than the flat growth witnessed in the last quarter. Meanwhile, volumes increased 4% in Mexico and the Caribbean, lower than the previous quarter levels.

Financials

Cash and cash equivalents were $620 million as of Sep 30, 2016, down from $911 million at 2015-end. Long-term obligations were $2,956 million, up from $2,875 million at 2015-end.

In the first nine-month period of 2016, net cash provided by operating activities totaled $683 million, down 5.5% year over year.

2016 Outlook

Dr Pepper Snapple raised its earnings guidance for 2016. The company expects earnings in the range of $4.32 to $4.40 per share, higher than its previously estimated range of $4.27 to $4.35. Currency headwinds are expected to hurt 2016 core EPS by 3%, in line with the prior projection.

The company still expects net sales growth of approximately 2%. Currency is likely to have a negative impact of about 1% on sales.

The full-year tax rate is expected at around 35% (lower than the earlier forecast of 35.5%). Capital expenditure is expected to be nearly 3% of net sales. The company still plans to repurchase $650 million to $700 million of shares in the year.

Dr Pepper Snapple carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Peer Releases

The Coca-Cola Company’s (KO - Free Report) third-quarter 2016 earnings and revenues beat the Zacks Consensus Estimate. Third-quarter 2016 adjusted earnings of the company were 49 cents per share, which beat the Zacks Consensus Estimate of 48 cents by 2.1%.

PepsiCo, Inc. (PEP - Free Report) reported better-than-expected third-quarter 2016 results (ending Sep 3), with earnings and revenues surpassing the Zacks Consensus Estimate.

Upcoming Peer Release

Monster Beverage Corporation (MNST - Free Report) is expected to report its quarterly results on Nov 3.

DR PEPPER SNAPL Price, Consensus and EPS Surprise

 

DR PEPPER SNAPL Price, Consensus and EPS Surprise | DR PEPPER SNAPL Quote

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