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Keurig (KDP) Q3 Earnings & Sales Top Estimates, Increase Y/Y
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KeurigDr Pepper Inc. (KDP - Free Report) reported robust third-quarter 2020 results, with the top and the bottom line surpassing the Zacks Consensus Estimate. Moreover, sales and earnings increased year over year. Results gained from solid performance in the Packaged Beverages and Coffee Systems segments.
Q3 in Detail
Adjusted earnings of 39 cents per share improved 22% year over year, surpassing the Zacks Consensus Estimate of 37 cents. The uptick can be attributed to strong top-line growth along with increase in adjusted operating income.
Net sales of $3,020 million exceeded the Zacks Consensus Estimate of $2,966.6 million and increased 5.2% from net sales of $2,870 million in the year-ago quarter. The increase was driven by a higher volume/mix of 6.6%, partially negated by reduced net price realization of 0.8%. On a constant-currency basis, net sales increased 5.8% year over year. Robust performance across the Packaged Beverages and Coffee Systems unit contributed to the top line.
In the third quarter, the company benefited from strong in-market performance in tracked channels. KeurigDr Pepper 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 as well as apple sauce. The upside was driven by strength in Dr Pepper, CORE hydration and evian premium water, A&W and Canada Dry CSDs, Snapple teas and juice drinks, Clamato vegetable juice and Motts apple juice and apple sauce.
In coffee, retail consumption for single-serve pods manufactured by KDP advanced nearly 10.1% in channels tracked by IRi. The dollar market share for KDP manufactured pods was a robust 82% in the third quarter, with improved share trends in its owned and licensed brand portfolio.
Keurig Dr Pepper, Inc Price, Consensus and EPS Surprise
Adjusted operating income grew 15.9% year over year to $874 million. Adjusted operating margin expanded 260 basis points (bps) to 28.9%. On a constant-currency basis, adjusted operating income increased 16.3%.
Segmental Details
Sales in the Beverage Concentrates segment declined 2.2% year over year to $352 million compared with $360 million in the year-ago quarter. Net revenues were primarily impacted by a 4.8% decline in volume/mix which was somewhat offset by increased price realizations to the tune of 2.6%. Volume/mix was mainly affected by decline in the fountain foodservice businessdue to coronavirus outbreak. Nevertheless, management is witnessing sequential improvement owing to reopening of quick-serve and other fast-casual restaurants.
Sales in the Packaged Beverages segment totaled $1.45 billion, up 10.7% from net sales of $1.31 billion in the year-ago quarter. This can be primarily attributed to 11.4% increase in volume/mix, partly negated by a 0.7% fall in price realizations.
Sales in the Latin America Beverages segment fell 10.1% to $124 million from $138 million in the prior-year quarter. The downside was the result of unfavorable currency translations. On a constant-currency basis, sales inched up 0.7% driven by 5.2% growth in price realization, partly offset by unfavorable volume/mix of 4.5%.
The Coffee Systems segment’s sales increased 3% to $1.10 billion. The increase was backed by improved volume/mix of 6%, somewhat offset by lower net price realization of 2.8% and unfavorable foreign currency translation of 0.2%. Net sales, on a constant-currency basis, were up 3.2%. Growth in volume/mix stemmed from a 2.4% increase in pod volumes on rise in at-home consumption, offset by decline in away-from-home business. Meanwhile, brewer volume advanced 34% driven by robust innovation in the past 24 months, continued marketing to grow household penetration and escalated brewer shipments to retailers for the upcoming holiday season.
Financials
KeurigDr Pepper ended third-quarter 2020 with cash and cash equivalents of $191 million as of Sep 30, 2020. Long-term obligations totaled $11,707 million and total stockholders’ equity was $23,297 million. Net cash provided by operating activities totaled $1,666 million for nine months ended Sep 30.
Outlook
For 2020, KeurigDr Pepper envisions constant currency net sales growth at the higher end of its 3-4% band. Adjusted earnings per share growth are expected to be at the high end of the 13-15% range, coming to $1.38-$1.40 per share.
Additionally, the company now expects management leverage ratio in the middle of the 3.5x to 3.8x range at the end of 2020. Further, it reiterated its management leverage ratio target of less than 3.0 in two to three years since the closing of the merger in July 2018.
Price Performance
We note that shares of this Zacks Rank #2 (Buy) company have gained 4.9% in the past six months compared with the industry’s growth of 4.4%.
United Natural Foods (UNFI - Free Report) , with a Zacks Rank #1, has a trailing four-quarter earnings surprise of 4.8%, on average.
Flowers Foods (FLO - Free Report) , with a Zacks Rank #2, has a trailing four-quarter earnings surprise of 8.2%, on average.
Have You Seen Zacks’ 2020 Election Stock Report?
The upcoming election could be a massive buying opportunity for savvy investors. Trillions of dollars will shift into new market sectors after the election. The question is, which sectors will soar for each candidate? Zacks has put together a new special report to help readers like you target big profits.
The 2020 Election Stock Report reveals specific stocks you’ll want to own immediately after the results are announced – 6 if Trump wins, 6 if Biden wins. Past election reports have led investors to gains of +71%, +83%, even +185% in the following months. This year’s picks could be even more lucrative.
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Keurig (KDP) Q3 Earnings & Sales Top Estimates, Increase Y/Y
KeurigDr Pepper Inc. (KDP - Free Report) reported robust third-quarter 2020 results, with the top and the bottom line surpassing the Zacks Consensus Estimate. Moreover, sales and earnings increased year over year. Results gained from solid performance in the Packaged Beverages and Coffee Systems segments.
Q3 in Detail
Adjusted earnings of 39 cents per share improved 22% year over year, surpassing the Zacks Consensus Estimate of 37 cents. The uptick can be attributed to strong top-line growth along with increase in adjusted operating income.
Net sales of $3,020 million exceeded the Zacks Consensus Estimate of $2,966.6 million and increased 5.2% from net sales of $2,870 million in the year-ago quarter. The increase was driven by a higher volume/mix of 6.6%, partially negated by reduced net price realization of 0.8%. On a constant-currency basis, net sales increased 5.8% year over year. Robust performance across the Packaged Beverages and Coffee Systems unit contributed to the top line.
In the third quarter, the company benefited from strong in-market performance in tracked channels. KeurigDr Pepper 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 as well as apple sauce. The upside was driven by strength in Dr Pepper, CORE hydration and evian premium water, A&W and Canada Dry CSDs, Snapple teas and juice drinks, Clamato vegetable juice and Motts apple juice and apple sauce.
In coffee, retail consumption for single-serve pods manufactured by KDP advanced nearly 10.1% in channels tracked by IRi. The dollar market share for KDP manufactured pods was a robust 82% in the third quarter, with improved share trends in its owned and licensed brand portfolio.
Keurig Dr Pepper, Inc Price, Consensus and EPS Surprise
Keurig Dr Pepper, Inc price-consensus-eps-surprise-chart | Keurig Dr Pepper, Inc Quote
Adjusted operating income grew 15.9% year over year to $874 million. Adjusted operating margin expanded 260 basis points (bps) to 28.9%. On a constant-currency basis, adjusted operating income increased 16.3%.
Segmental Details
Sales in the Beverage Concentrates segment declined 2.2% year over year to $352 million compared with $360 million in the year-ago quarter. Net revenues were primarily impacted by a 4.8% decline in volume/mix which was somewhat offset by increased price realizations to the tune of 2.6%. Volume/mix was mainly affected by decline in the fountain foodservice businessdue to coronavirus outbreak. Nevertheless, management is witnessing sequential improvement owing to reopening of quick-serve and other fast-casual restaurants.
Sales in the Packaged Beverages segment totaled $1.45 billion, up 10.7% from net sales of $1.31 billion in the year-ago quarter. This can be primarily attributed to 11.4% increase in volume/mix, partly negated by a 0.7% fall in price realizations.
Sales in the Latin America Beverages segment fell 10.1% to $124 million from $138 million in the prior-year quarter. The downside was the result of unfavorable currency translations. On a constant-currency basis, sales inched up 0.7% driven by 5.2% growth in price realization, partly offset by unfavorable volume/mix of 4.5%.
The Coffee Systems segment’s sales increased 3% to $1.10 billion. The increase was backed by improved volume/mix of 6%, somewhat offset by lower net price realization of 2.8% and unfavorable foreign currency translation of 0.2%. Net sales, on a constant-currency basis, were up 3.2%. Growth in volume/mix stemmed from a 2.4% increase in pod volumes on rise in at-home consumption, offset by decline in away-from-home business. Meanwhile, brewer volume advanced 34% driven by robust innovation in the past 24 months, continued marketing to grow household penetration and escalated brewer shipments to retailers for the upcoming holiday season.
Financials
KeurigDr Pepper ended third-quarter 2020 with cash and cash equivalents of $191 million as of Sep 30, 2020. Long-term obligations totaled $11,707 million and total stockholders’ equity was $23,297 million. Net cash provided by operating activities totaled $1,666 million for nine months ended Sep 30.
Outlook
For 2020, KeurigDr Pepper envisions constant currency net sales growth at the higher end of its 3-4% band. Adjusted earnings per share growth are expected to be at the high end of the 13-15% range, coming to $1.38-$1.40 per share.
Additionally, the company now expects management leverage ratio in the middle of the 3.5x to 3.8x range at the end of 2020. Further, it reiterated its management leverage ratio target of less than 3.0 in two to three years since the closing of the merger in July 2018.
Price Performance
We note that shares of this Zacks Rank #2 (Buy) company have gained 4.9% in the past six months compared with the industry’s growth of 4.4%.
More Solid Consumer Staple Bets
National Beverage Corp. (FIZZ - Free Report) ,with a Zacks Rank #1 (Strong Buy), has a trailing four-quarter earnings surprise of 26.6%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
United Natural Foods (UNFI - Free Report) , with a Zacks Rank #1, has a trailing four-quarter earnings surprise of 4.8%, on average.
Flowers Foods (FLO - Free Report) , with a Zacks Rank #2, has a trailing four-quarter earnings surprise of 8.2%, on average.
Have You Seen Zacks’ 2020 Election Stock Report?
The upcoming election could be a massive buying opportunity for savvy investors. Trillions of dollars will shift into new market sectors after the election. The question is, which sectors will soar for each candidate? Zacks has put together a new special report to help readers like you target big profits.
The 2020 Election Stock Report reveals specific stocks you’ll want to own immediately after the results are announced – 6 if Trump wins, 6 if Biden wins. Past election reports have led investors to gains of +71%, +83%, even +185% in the following months. This year’s picks could be even more lucrative.
Check out Zacks’ 2020 Election Stock Report >>