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Keurig Dr Pepper (KDP) Q4 Earnings In Line, Sales Surpass
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Keurig Dr Pepper Inc. (KDP - Free Report) reported fourth-quarter 2021 results, wherein the bottom line was in line with the Zacks Consensus Estimate, while sales surpassed the same. Both metrics improved year over year. Results gained from a solid portfolio demand. However, COVID-related headwinds and other challenges, including supply-chain disruption stemming from labor shortages, lack of material availability, transportation issues and inflationary pressure, acted as deterrents.
Management also highlighted the launch of the K-Supreme SMART in 2021, which is the company’s first connected brewer. Customer response for the latest development has been favorable.
Shares of KDP have gained 5.3% in the past three months compared with the industry’s growth of 6.8%.
Image Source: Zacks Investment Research
Q4 in Detail
Adjusted earnings of 45 cents per share advanced 15.4% year over year and met the Zacks Consensus Estimate. This marked double-digit earnings growth for the third successive quarter. The metric also advanced 28.6% on a two-year basis.
Net sales of $3,391 million surpassed the Zacks Consensus Estimate of $3,312 million and increased 8.7% from the year-ago quarter. The upside was driven by growth in the Packaged Beverages, Beverage Concentrates and Latin America Beverages segments. On a constant-currency (cc) basis, net sales increased 8.5%, driven by an increased volume/mix of 4.4% and favorable net price realization of 4.1%.
In the fourth quarter, the company benefited from a robust in-market performance, with dollar consumption increasing 12.6% across the cold beverage retail base, including growth in categories such as CSDs, premium unflavored water, apple juice, apple sauce, and coconut water. Dr Pepper, Sunkist, Canada Dry, A&W and Squirt CSDs, CORE Hydration and Evian, Vita Coco, Polar, and Mott's apple juice and apple sauce were the key brands aiding growth. On a two-year basis, KDP’s consumption of its cold beverage portfolio grew 27%.
In coffee, the retail consumption for single-serve pods manufactured by KDP rose 3.4% in channels tracked by IRi. This can be attributable to strength in partner brands and KDP owned and licensed brands, which somewhat offset sluggishness in private label pods. The dollar market share for pods manufactured by KDP advanced 83.5% in the fourth quarter. The company witnessed improvement in the away-from-home channel’s performance in the quarter.
However, this Zacks Rank #4 (Sell) company notes that the increased consumer mobility is yet to translate into the return-to-office trend. The retail consumption of single-serve pods manufactured by KDP rose 11.2% in IRi tracked channels on a two-year basis.
Adjusted gross profit rose 47% year over year to $1,826 million, while adjusted gross margin contracted 210 basis points to 53.8%. This was mainly due to pricing actions as well as robust productivity programs and merger synergies.
Adjusted operating income rose 6.1% year over year to $910 million, while the metric grew 11.9% on a two-year basis. This was mainly driven by robust adjusted gross profit, and gains from productivity, merger, and its strategic asset investment program. On a cc basis, adjusted operating income increased 5.9%. Meanwhile, the adjusted operating margin contracted 70 basis points to 28.6%, owing to significantly higher marketing investments.
Segmental Details
Sales in the Coffee Systems segment remained flat year over year to $1,318 million. At cc, net sales fell 0.5%, with higher volume/mix of 0.1% and unfavorable net price realization of 0.6%. Net price realization was affected by continued moderation in strategic pod pricing, customer fines incurred, unfulfilled demand due to supply-chain challenges and labor shortages. On the flip side, volumes/mix gained from pod volume growth stemming from strength in the at-home business and the recovery in the away-from-home business, along with reduced brewer shipments.
Sales in the Packaged Beverages segment totaled $1,530 million, up 17.1% year over year. Segment sales rose 17% at cc, gaining from a favorable volume/mix of 10.3% and a higher net price realization of 6.7%. The segment benefitted from growth in CSDs, particularly Dr Pepper, Canada Dry, Sunkist, A&W, 7UP, CORE Hydration, Vita Coco, Clamato, Yoo-Hoo, and Bai and Squirt, as well as growth in Polar, Snapple and Mott's.
Sales in the Beverage Concentrates segment rose 9.2% year over year to $391 million. At cc, the segment’s net sales increased 8.9%, gaining from a favorable net price realization of 9.8%, partly offset by a lower volume/mix of 0.9%. Reduced concentrate shipments hurt volume/mix to some extent, while a recovery in the fountain foodservice business remained an upside.
The Latin America Beverages segment’s sales advanced 11.8% to $152 million. At cc, net sales increased 12.5%, owing to volume/mix growth of 3.7% and improved net price realization of 8.8%. Strength in Clamato, Peñafiel and Squirt aided quarterly segment growth.
Keurig Dr Pepper, Inc Price, Consensus and EPS Surprise
As of Dec 31, 2021, Keurig Dr Pepper’s cash and cash equivalents were $567 million. It also had long-term obligations of $11,578 million and total stockholders’ equity of $24,972 million (excluding non-controlling interest). Net cash provided by operating activities totaled $2,874 million at the end of 2021.
The company generated a free cash flow of $2.57 billion in 2021. The solid free cash flow enabled it to reduce total financial obligations by $1.73 million in 2021.
Outlook
Driven by robust quarterly results, Keurig Dr Pepper issued its 2022 view, which appears encouraging. The company expects net sales and bottom-line growth in the mid-single-digit range. Adjusted earnings are likely to be in the high-single-digits in the second half of 2022.
However, management expects supply-chain challenges to be more pronounced in the first quarter of 2022 and improve in the remaining three quarters. Inflation is expected to hurt margins for most of 2022, with chances of a slight improvement in late 2022.
The Zacks Consensus Estimate for Inter Parfums’ current financial-year sales and EPS suggests growth of 63.2% and 117.4%, respectively, from the year-ago period’s reported figures.
Albertsons Companies currently sports a Zacks Rank #1. ACI has a trailing four-quarter earnings surprise of 31.8%, on average.
The Zacks Consensus Estimate for Albertsons Companies’ current financial-year sales suggests year-over-year growth of 1.6%. The same for EPS suggests a decline of 9% from the year-ago period’s reported figures
Medifast, one of the leading health and wellness companies, currently has a Zacks Rank #2 (Buy). MED has a trailing four-quarter earnings surprise of 17.3%, on average.
The Zacks Consensus Estimate for Medifast’s current financial-year sales and earnings suggests growth of 63% and 49.3%, respectively, from the year-ago period’s figures.
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Keurig Dr Pepper (KDP) Q4 Earnings In Line, Sales Surpass
Keurig Dr Pepper Inc. (KDP - Free Report) reported fourth-quarter 2021 results, wherein the bottom line was in line with the Zacks Consensus Estimate, while sales surpassed the same. Both metrics improved year over year. Results gained from a solid portfolio demand. However, COVID-related headwinds and other challenges, including supply-chain disruption stemming from labor shortages, lack of material availability, transportation issues and inflationary pressure, acted as deterrents.
Management also highlighted the launch of the K-Supreme SMART in 2021, which is the company’s first connected brewer. Customer response for the latest development has been favorable.
Shares of KDP have gained 5.3% in the past three months compared with the industry’s growth of 6.8%.
Image Source: Zacks Investment Research
Q4 in Detail
Adjusted earnings of 45 cents per share advanced 15.4% year over year and met the Zacks Consensus Estimate. This marked double-digit earnings growth for the third successive quarter. The metric also advanced 28.6% on a two-year basis.
Net sales of $3,391 million surpassed the Zacks Consensus Estimate of $3,312 million and increased 8.7% from the year-ago quarter. The upside was driven by growth in the Packaged Beverages, Beverage Concentrates and Latin America Beverages segments. On a constant-currency (cc) basis, net sales increased 8.5%, driven by an increased volume/mix of 4.4% and favorable net price realization of 4.1%.
In the fourth quarter, the company benefited from a robust in-market performance, with dollar consumption increasing 12.6% across the cold beverage retail base, including growth in categories such as CSDs, premium unflavored water, apple juice, apple sauce, and coconut water. Dr Pepper, Sunkist, Canada Dry, A&W and Squirt CSDs, CORE Hydration and Evian, Vita Coco, Polar, and Mott's apple juice and apple sauce were the key brands aiding growth. On a two-year basis, KDP’s consumption of its cold beverage portfolio grew 27%.
In coffee, the retail consumption for single-serve pods manufactured by KDP rose 3.4% in channels tracked by IRi. This can be attributable to strength in partner brands and KDP owned and licensed brands, which somewhat offset sluggishness in private label pods. The dollar market share for pods manufactured by KDP advanced 83.5% in the fourth quarter. The company witnessed improvement in the away-from-home channel’s performance in the quarter.
However, this Zacks Rank #4 (Sell) company notes that the increased consumer mobility is yet to translate into the return-to-office trend. The retail consumption of single-serve pods manufactured by KDP rose 11.2% in IRi tracked channels on a two-year basis.
Adjusted gross profit rose 47% year over year to $1,826 million, while adjusted gross margin contracted 210 basis points to 53.8%. This was mainly due to pricing actions as well as robust productivity programs and merger synergies.
Adjusted operating income rose 6.1% year over year to $910 million, while the metric grew 11.9% on a two-year basis. This was mainly driven by robust adjusted gross profit, and gains from productivity, merger, and its strategic asset investment program. On a cc basis, adjusted operating income increased 5.9%. Meanwhile, the adjusted operating margin contracted 70 basis points to 28.6%, owing to significantly higher marketing investments.
Segmental Details
Sales in the Coffee Systems segment remained flat year over year to $1,318 million. At cc, net sales fell 0.5%, with higher volume/mix of 0.1% and unfavorable net price realization of 0.6%. Net price realization was affected by continued moderation in strategic pod pricing, customer fines incurred, unfulfilled demand due to supply-chain challenges and labor shortages. On the flip side, volumes/mix gained from pod volume growth stemming from strength in the at-home business and the recovery in the away-from-home business, along with reduced brewer shipments.
Sales in the Packaged Beverages segment totaled $1,530 million, up 17.1% year over year. Segment sales rose 17% at cc, gaining from a favorable volume/mix of 10.3% and a higher net price realization of 6.7%. The segment benefitted from growth in CSDs, particularly Dr Pepper, Canada Dry, Sunkist, A&W, 7UP, CORE Hydration, Vita Coco, Clamato, Yoo-Hoo, and Bai and Squirt, as well as growth in Polar, Snapple and Mott's.
Sales in the Beverage Concentrates segment rose 9.2% year over year to $391 million. At cc, the segment’s net sales increased 8.9%, gaining from a favorable net price realization of 9.8%, partly offset by a lower volume/mix of 0.9%. Reduced concentrate shipments hurt volume/mix to some extent, while a recovery in the fountain foodservice business remained an upside.
The Latin America Beverages segment’s sales advanced 11.8% to $152 million. At cc, net sales increased 12.5%, owing to volume/mix growth of 3.7% and improved net price realization of 8.8%. Strength in Clamato, Peñafiel and Squirt aided quarterly segment growth.
Keurig Dr Pepper, Inc Price, Consensus and EPS Surprise
Keurig Dr Pepper, Inc price-consensus-eps-surprise-chart | Keurig Dr Pepper, Inc Quote
Financials
As of Dec 31, 2021, Keurig Dr Pepper’s cash and cash equivalents were $567 million. It also had long-term obligations of $11,578 million and total stockholders’ equity of $24,972 million (excluding non-controlling interest). Net cash provided by operating activities totaled $2,874 million at the end of 2021.
The company generated a free cash flow of $2.57 billion in 2021. The solid free cash flow enabled it to reduce total financial obligations by $1.73 million in 2021.
Outlook
Driven by robust quarterly results, Keurig Dr Pepper issued its 2022 view, which appears encouraging. The company expects net sales and bottom-line growth in the mid-single-digit range. Adjusted earnings are likely to be in the high-single-digits in the second half of 2022.
However, management expects supply-chain challenges to be more pronounced in the first quarter of 2022 and improve in the remaining three quarters. Inflation is expected to hurt margins for most of 2022, with chances of a slight improvement in late 2022.
How Other Stocks Fared
Some better-ranked stocks in the Consumer Staples sector are Inter Parfums (IPAR - Free Report) , Albertsons Companies (ACI - Free Report) and Medifast (MED - Free Report) .
Inter Parfums currently sports a Zacks Rank #1 (Strong Buy). IPAR has a trailing four-quarter earnings surprise of 29.7%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Inter Parfums’ current financial-year sales and EPS suggests growth of 63.2% and 117.4%, respectively, from the year-ago period’s reported figures.
Albertsons Companies currently sports a Zacks Rank #1. ACI has a trailing four-quarter earnings surprise of 31.8%, on average.
The Zacks Consensus Estimate for Albertsons Companies’ current financial-year sales suggests year-over-year growth of 1.6%. The same for EPS suggests a decline of 9% from the year-ago period’s reported figures
Medifast, one of the leading health and wellness companies, currently has a Zacks Rank #2 (Buy). MED has a trailing four-quarter earnings surprise of 17.3%, on average.
The Zacks Consensus Estimate for Medifast’s current financial-year sales and earnings suggests growth of 63% and 49.3%, respectively, from the year-ago period’s figures.