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Dr Pepper Snapple Group Inc (DPS - Analyst Report) is set to report fourth quarter 2012 results on Feb 13. Last quarter it posted a 2.60% positive surprise. Let’s see how things are shaping up for this announcement.

Growth Factors this Past Quarter

Though the company reported decent earnings growth in the third quarter, sales growth was flat year over year and declined sequentially. Sales were once again hurt by volume headwinds, which offset pricing gains. Management commented that the volume decline was mainly due to stronger year-ago comparisons, which included heavy pricing and promotional activity that were not repeated in this quarter. Moreover, though the company maintained its full year 2012 earnings guidance, it trimmed the sales outlook due to weaker-than-expected volume growth. Commodity costs are also expected to increase in the fourth quarter due to higher costs of apples used in Mott’s juice.

Earnings Whispers?

Our proven model does not conclusively show that Dr Pepper is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Negative Zacks ESP: The Earnings ESP is -1.18%. That is because the Most Accurate Estimate stands at 84 cents while the Zacks Consensus Estimate is higher at 85 cents. That is a difference of -1.18%.

Zacks #3 Rank (Hold): Dr. Pepper’s Zacks Rank #3 (Hold) lowers the predictive power of ESP because the Zacks Rank #3 when combined with a negative ESP makes surprise prediction difficult.

We caution against stocks with Zacks Rank #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Dr Pepper has seen a downward pressure on estimates in the past two months. This may be due to persistent weakness seen in the overall carbonated soft drinks’ (CSD) volumes in North America since the past few months. Changing consumer preferences, increasing health consciousness and growing regulatory pressures are affecting beverage sales. This is hurting CSD volumes for Dr Pepper as well as other beverage companies like The Coca-Cola Company (KO - Analyst Report).

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

Coca-Cola FEMSA S.A.B de C.V. (KOF - Snapshot Report), with Earnings ESP of +7.87% and a Zacks Rank #2 (Buy)

Kellogg Company (K - Analyst Report), with an Earnings ESP of +0.97% and a Zacks Rank #2 (Buy)

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