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Will Resin Supply Default Hurt Dr Pepper's (DPS) Q3 Earnings?
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Dr Pepper Snapple Group, Inc. is set to report third-quarter 2017 results on Oct 25, before the market opens.
The company expects the default by a resin supplier to its operations in Mexico to affect its 2017 operating income by approximately $7-$9 million or 3 cents per share, the impact of which will be felt more in the third quarter of 2017. The Zacks Consensus Estimate for third-quarter earnings is pegged at $1.15, reflecting a decline of 1.8% year over year.
Apart from the default, the hurricanes in the United States and the earthquake in Mexico impacted Dr Pepper’s operations. However, the company did not specify the extent to which such calamities have affected its operating results. Also, it expects about a $5-million increase in health, welfare and risk insurance in the third quarter.
Apart from these headwinds, let us analyze a few other factors that might affect Q3 results:
Weak Volumes: Sluggish carbonated beverages (comprise around 82% of its business) volume trends are hurting carbonated beverages (CSD) category growth for quite some time now. Cross-category competition and growing health and wellness consciousness are impeding CSD category growth. The diet drinks are also under pressure due to increasing consumer concern regarding the use of artificial sweeteners.
Notably, the Zacks Consensus Estimate for CSD volume growth is projected at a meager 0.02% for the third quarter, less than 3% growth reported last quarter and 2% in the prior-year quarter. Additionally, bottler case sales (BCS) volume is expected to grow 0.02% in the third quarter, lower than 3% growth reported last quarter and 2% in the prior-year quarter. Non-carbonated beverages (NCBs) volumes are expected to grow 0.04%, less than 5% growth seen in the last quarter and flat volume in the prior-year quarter.
Overall, sales volume is expected to increase only 0.02% as per the Zacks Consensus Estimate, compared with 4% growth reported last quarter and 1% in the year-ago quarter.
Bai Brands: Dr Pepper will be making heavy marketing investments for Bai brands in the third quarter. The company has already spent $20 million for promoting the brand in the second quarter of 2017.
Bai Brands is one of the fastest growing beverage brands that offer a family of premium better-for-you beverages. Now, with the shift of consumer preference toward healthier drinks, Dr Pepper’s inclusion of Bai Brands will boost its profit margin amid declining soda sales.
RCI Program: We are encouraged by the company’s Rapid Continuous Improvement (RCI) program through which it has been able to reduce inventory and storage costs and improve cash flows, which can be returned to shareholders via dividends and re-invested in the business to boost the top line.
Overall, the Zacks Consensus Estimate for third-quarter revenues is pegged at $1.77 billion, reflecting an increase of 5.1% year over year.
Here is what our quantitative model predicts:
Dr Pepper does not have the right combination of two main ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.
Zacks ESP: The Earnings ESP for Dr Pepper is -0.10%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Dr Pepper carries a Zacks Rank #4. We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Dr Pepper Snapple Group, Inc Price and EPS Surprise
Here are some companies in the Consumer Staples sector that you may want to consider as our model shows that these also have the right combination of elements to post an earnings beat:
B&G Foods, Inc. (BGS - Free Report) has an Earnings ESP of +4.17% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Coca-Cola European Partners PLC has an Earnings ESP of +1.01% and a Zacks Rank #3.
Monster Beverage Corporation (MNST - Free Report) has an Earnings ESP of +0.36% and a Zacks Rank #3.
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It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation. See Them Free>>
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Will Resin Supply Default Hurt Dr Pepper's (DPS) Q3 Earnings?
Dr Pepper Snapple Group, Inc. is set to report third-quarter 2017 results on Oct 25, before the market opens.
The company expects the default by a resin supplier to its operations in Mexico to affect its 2017 operating income by approximately $7-$9 million or 3 cents per share, the impact of which will be felt more in the third quarter of 2017. The Zacks Consensus Estimate for third-quarter earnings is pegged at $1.15, reflecting a decline of 1.8% year over year.
Apart from the default, the hurricanes in the United States and the earthquake in Mexico impacted Dr Pepper’s operations. However, the company did not specify the extent to which such calamities have affected its operating results. Also, it expects about a $5-million increase in health, welfare and risk insurance in the third quarter.
Apart from these headwinds, let us analyze a few other factors that might affect Q3 results:
Weak Volumes: Sluggish carbonated beverages (comprise around 82% of its business) volume trends are hurting carbonated beverages (CSD) category growth for quite some time now. Cross-category competition and growing health and wellness consciousness are impeding CSD category growth. The diet drinks are also under pressure due to increasing consumer concern regarding the use of artificial sweeteners.
Notably, the Zacks Consensus Estimate for CSD volume growth is projected at a meager 0.02% for the third quarter, less than 3% growth reported last quarter and 2% in the prior-year quarter. Additionally, bottler case sales (BCS) volume is expected to grow 0.02% in the third quarter, lower than 3% growth reported last quarter and 2% in the prior-year quarter. Non-carbonated beverages (NCBs) volumes are expected to grow 0.04%, less than 5% growth seen in the last quarter and flat volume in the prior-year quarter.
Overall, sales volume is expected to increase only 0.02% as per the Zacks Consensus Estimate, compared with 4% growth reported last quarter and 1% in the year-ago quarter.
Bai Brands: Dr Pepper will be making heavy marketing investments for Bai brands in the third quarter. The company has already spent $20 million for promoting the brand in the second quarter of 2017.
Bai Brands is one of the fastest growing beverage brands that offer a family of premium better-for-you beverages. Now, with the shift of consumer preference toward healthier drinks, Dr Pepper’s inclusion of Bai Brands will boost its profit margin amid declining soda sales.
RCI Program: We are encouraged by the company’s Rapid Continuous Improvement (RCI) program through which it has been able to reduce inventory and storage costs and improve cash flows, which can be returned to shareholders via dividends and re-invested in the business to boost the top line.
Overall, the Zacks Consensus Estimate for third-quarter revenues is pegged at $1.77 billion, reflecting an increase of 5.1% year over year.
Here is what our quantitative model predicts:
Dr Pepper does not have the right combination of two main ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.
Zacks ESP: The Earnings ESP for Dr Pepper is -0.10%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Dr Pepper carries a Zacks Rank #4. We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Dr Pepper Snapple Group, Inc Price and EPS Surprise
Dr Pepper Snapple Group, Inc Price and EPS Surprise | Dr Pepper Snapple Group, Inc Quote
Stocks to Consider
Here are some companies in the Consumer Staples sector that you may want to consider as our model shows that these also have the right combination of elements to post an earnings beat:
B&G Foods, Inc. (BGS - Free Report) has an Earnings ESP of +4.17% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Coca-Cola European Partners PLC has an Earnings ESP of +1.01% and a Zacks Rank #3.
Monster Beverage Corporation (MNST - Free Report) has an Earnings ESP of +0.36% and a Zacks Rank #3.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>