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Keurig's Packaged Beverages Unit Lures Consumers Amid Coronavirus
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Keurig Dr Pepper, Inc. (KDP - Free Report) has emerged as one of the many beverage companies, which are taking advantage of the coronavirus-led stay-at-home and work-from-home trends that are likely to continue. Its second-quarter 2020 results reflected strong sales growth across packaged beverages and coffee businesses, which contributed to the top line. This growth can be attributable to a sudden spike in at-home consumption, stemming from the COVID-19 outbreak, and strong market share.
Notably, it witnessed market share gains across several major categories — CSD's3, premium unflavored water, shelf-stable fruit drinks, shelf-stable vegetable juice and shelf-stable apple juice and apple sauce. The upside was driven by strength in Dr Pepper and Canada Dry CSDs, CORE hydration and evian premium water, Snapple juice drinks, Clamato vegetable juice, and Motts apple juice and apple sauce.
Further, the company has been witnessing strong growth in in-home coffee consumption due to the work-from-home trend and the inability to visit coffee shops. Hence, sales for the Coffee Systems segment increased 5.4% during the second quarter, backed by year-over-year improved volume/mix of 8.3%. Moreover, brewer volumes advanced 11.6% on robust innovation in the past 12 months and investments to boost household penetration.
Encouragingly, management reiterated its guidance for 2020, driven by a solid product portfolio and a robust distribution network. The company expects net sales growth to be at the lower end of 3-4% for 2020. However, it anticipates adjusted earnings per share of $1.38-$1.40, which suggests growth of 13-15%. Aggressive cost-containment actions, productivity improvement plans and gains from partnerships are expected to aid 2020 results.
Markedly, the Zacks Consensus Estimate for 2020 sales and earnings indicates an improvement of 3.3% and 14.8%, respectively, from the year-ago period, which further raises optimism in this Zacks Rank #3 (Hold) stock.
However, Keurig grapples with impacts of the coronavirus outbreak, which were also felt across some segments during the second quarter. In the said quarter, the away-from-home coffee channel was significantly affected due to office closures and hospitality shutdowns caused by the pandemic. Also, a steep decline in the fountain foodservice business due to coronavirus-related shelter-in-place orders and change in consumer behavior remains a concern.
All said, we hope that strength in the Packaged Beverages and Coffee Systems businesses stemming from a sudden spike in at-home consumption is likely to uphold the stock. The stock has lost 3.8% year to date compared with the industry’s decline of 7.7%.
Molson Coors Beverage Company (TAP - Free Report) has an expected long-term earnings growth rate of 6% and a Zacks Rank #1.
National Beverage Corp. (FIZZ - Free Report) , with a Zacks Rank #2 (Buy) at present, delivered an earnings surprise of 26.6% in the last-reported quarter.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.3% per year.
These 7 were selected because of their superior potential for immediate breakout.
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Keurig's Packaged Beverages Unit Lures Consumers Amid Coronavirus
Keurig Dr Pepper, Inc. (KDP - Free Report) has emerged as one of the many beverage companies, which are taking advantage of the coronavirus-led stay-at-home and work-from-home trends that are likely to continue. Its second-quarter 2020 results reflected strong sales growth across packaged beverages and coffee businesses, which contributed to the top line. This growth can be attributable to a sudden spike in at-home consumption, stemming from the COVID-19 outbreak, and strong market share.
Notably, it witnessed market share gains across several major categories — CSD's3, premium unflavored water, shelf-stable fruit drinks, shelf-stable vegetable juice and shelf-stable apple juice and apple sauce. The upside was driven by strength in Dr Pepper and Canada Dry CSDs, CORE hydration and evian premium water, Snapple juice drinks, Clamato vegetable juice, and Motts apple juice and apple sauce.
Further, the company has been witnessing strong growth in in-home coffee consumption due to the work-from-home trend and the inability to visit coffee shops. Hence, sales for the Coffee Systems segment increased 5.4% during the second quarter, backed by year-over-year improved volume/mix of 8.3%. Moreover, brewer volumes advanced 11.6% on robust innovation in the past 12 months and investments to boost household penetration.
Encouragingly, management reiterated its guidance for 2020, driven by a solid product portfolio and a robust distribution network. The company expects net sales growth to be at the lower end of 3-4% for 2020. However, it anticipates adjusted earnings per share of $1.38-$1.40, which suggests growth of 13-15%. Aggressive cost-containment actions, productivity improvement plans and gains from partnerships are expected to aid 2020 results.
Markedly, the Zacks Consensus Estimate for 2020 sales and earnings indicates an improvement of 3.3% and 14.8%, respectively, from the year-ago period, which further raises optimism in this Zacks Rank #3 (Hold) stock.
However, Keurig grapples with impacts of the coronavirus outbreak, which were also felt across some segments during the second quarter. In the said quarter, the away-from-home coffee channel was significantly affected due to office closures and hospitality shutdowns caused by the pandemic. Also, a steep decline in the fountain foodservice business due to coronavirus-related shelter-in-place orders and change in consumer behavior remains a concern.
All said, we hope that strength in the Packaged Beverages and Coffee Systems businesses stemming from a sudden spike in at-home consumption is likely to uphold the stock. The stock has lost 3.8% year to date compared with the industry’s decline of 7.7%.
3 Beverage Stocks You May Count On
Monster Beverage Company (MNST - Free Report) has an expected long-term earnings growth rate of 12% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Molson Coors Beverage Company (TAP - Free Report) has an expected long-term earnings growth rate of 6% and a Zacks Rank #1.
National Beverage Corp. (FIZZ - Free Report) , with a Zacks Rank #2 (Buy) at present, delivered an earnings surprise of 26.6% in the last-reported quarter.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.3% per year.
These 7 were selected because of their superior potential for immediate breakout.
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