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Keurig Dr Pepper (KDP) Q2 Earnings Meet Estimates, Sales Beat
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Keurig Dr Pepper Inc. (KDP - Free Report) has reported second-quarter 2022 results, wherein the bottom line was in line with the Zacks Consensus Estimate, while sales surpassed the same. Both metrics improved year over year. A recovery in the supply chain of coffee and non-carbonated beverages, better pricing to mitigate inflation, and continued portfolio growth contributed to the quarterly results.
In the said quarter, the company announced acquiring the global rights to a non-alcoholic, ready-to-drink cocktail brand, Atypique. The move is likely to help expand its customer base in Canada. In another recent development, Keurig collaborated with BLK & Bold Specialty Beverages to launch BLK & Bold coffees in K-Cup pods for the Keurig brewing system.
Shares of KDP have gained 6.2% year to date compared with the industry’s 4.8% growth.
Image Source: Zacks Investment Research
Q2 in Detail
Adjusted earnings of 39 cents per share grew 2.6% year over year and met the Zacks Consensus Estimate.
Net sales of $3,554 million surpassed the Zacks Consensus Estimate of $3,391 million. The reported figure jumped 13.2% from the year-ago quarter’s level and 13.5% on a constant-currency basis (cc). The upside was driven by growth in the Packaged Beverages, Beverage Concentrates and Latin America Beverages segments, as well as higher volumes and better pricing. Net price realization grew 10.4% with a higher volume/mix of 3.1%.
In the reported quarter, Keurig Dr Pepper’s in-market performance in the Liquid Refreshment Beverages (LRB) category remained sturdy, with retail dollar consumption growing 9.9% and market share expanding above 92% of KDP's cold beverage portfolio. This mainly reflected strength in CSDs3, premium unflavored water, coconut water, seltzers, teas, apple juice, vegetable juice and fruit drinks.
Also, strength in Dr Pepper, Sunkist, Canada Dry, A&W and Squirt CSDs, CORE Hydration, Vita Coco, Polar seltzers, Snapple, Hawaiian Punch, and Mott's aided the results.
In coffee, retail dollar consumption of single-serve pods manufactured by Keurig Dr Pepper rose 3.8% in channels tracked by Iri, driven by improved pricing in partner and KDP-owned and licensed brands. KDP’s coffee systems’ sales increased 9%, owing to the company’s completion of the coffee recovery program. Also, KDP’s manufactured share was solid at 81.8%.
Adjusted gross profit rose 10% year over year to $1,945 million, while the adjusted gross margin contracted 180 basis points (bps) to 54.7%. This was mainly due to higher transportation, warehousing and retail labor costs. Adjusted operating income dipped 1.2% to $832 million in the quarter, whereas the adjusted operating margin contracted 330 bps to 23.4%.
Segmental Details
Sales in the Coffee Systems segment rose 8.5% year over year to $1,195 million, driven by the early completion of the coffee recovery program, which led the company to rebuild retailer and partner inventories, and restore the customer service levels. At cc, net sales increased 9.1%.
Net price realization grew 5.8%, offset by a higher volume/mix of 3.3%. Net price realization was backed by pricing actions in pod and brewer. The volume/mix decline was due to pod volume growth of 4.7%, which offset the brewer volume decline of 4.2%.
Sales in the Packaged Beverages segment totaled $1,689 million, up 12.8% year over year, gaining from a favorable volume/mix of 1.9% and a higher net price realization of 11%. Segment sales rose 12.9% at cc. The segment benefited from growth in CSDs, CORE Hydration, Snapple, Polar seltzers, Vita Coco, Mott's and Hawaiian Punch.
Sales in the Beverage Concentrates segment rose 22.7% year over year to $460 million, gaining from a favorable net price realization of 19.2% and a volume/mix rise of 3.7%. At cc, the segment’s net sales increased 22.9%. While total shipment volume rose 3.5% year over year on increases in Canada Dry and Dr Pepper, bottler case sales volume remained flat year over year.
The Latin America Beverages segment’s sales advanced 26.5% on a reported and cc basis to $210 million. This was mainly caused by volume/mix growth of 12% and an improved net price realization of 14.5%. Strength in Peñafiel, Clamato, Squirt and Mott's aided quarterly segmental growth.
Financials
As of Jun 30, 2022, Keurig Dr Pepper’s cash and cash equivalents were $552 million. KDP also had long-term obligations of $11,555 million and a total stockholders’ equity of $25,391 million (excluding non-controlling interest).
Net cash provided by operating activities totaled $1,339 million at the end of the six months ending Jun 30. The Zacks Rank #3 (Hold) company generated a free cash flow of $599 million in the reported quarter.
In the second quarter, the company bought back 2.5 million shares for $87.6 million. It has $3.9 billion remaining under its share repurchase authorization valid till Dec 31, 2025.
Keurig Dr Pepper, Inc Price, Consensus and EPS Surprise
Driven by the robust quarterly results, Keurig Dr Pepper has raised its sales view for 2022. Management projects net sales (cc) to grow in the low-double-digit range compared with the earlier stated increase in the high-single digits.
Management has reaffirmed the adjusted earnings per share view of mid-single-digit growth for 2022. Adjusted earnings per share growth are expected to be in the high-single digits for the second half of 2022.
Sysco, the marketer and distributor of food and related products, currently sports a Zacks Rank #1 (Strong Buy). SYY has a trailing two-quarter earnings surprise of 93.75%, on average. It has an expected long-term earnings growth rate of 11%. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Sysco’s current financial-year sales and earnings per share suggests growth of 35.9% and 145.5%, respectively, from the year-ago reported numbers. The company has a trailing four-quarter earnings surprise of 3.7%, on average.
Chef’s Warehouse, a distributor of specialty food products in the United States, currently flaunts a Zacks Rank #1. CHEF has a trailing four-quarter earnings surprise of 372.3%, on average.
The Zacks Consensus Estimate for Chef Warehouse’s current financial-year sales and earnings per share suggests growth of 38.1% and 2540%, respectively, from the year-ago reported numbers.
Campbell Soup, the manufacturer and marketer of high-quality, branded convenience food products, currently carries a Zacks Rank #2 (Buy). It has an expected long-term earnings growth rate of 1.6%.
The Zacks Consensus Estimate for Campbell Soup’s current financial-year sales and earnings per share suggests growth of 10.1% and 15.4%, respectively, from the year-ago reported numbers. CPB has a trailing two-quarter earnings surprise of 10.8%, on average.
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Keurig Dr Pepper (KDP) Q2 Earnings Meet Estimates, Sales Beat
Keurig Dr Pepper Inc. (KDP - Free Report) has reported second-quarter 2022 results, wherein the bottom line was in line with the Zacks Consensus Estimate, while sales surpassed the same. Both metrics improved year over year. A recovery in the supply chain of coffee and non-carbonated beverages, better pricing to mitigate inflation, and continued portfolio growth contributed to the quarterly results.
In the said quarter, the company announced acquiring the global rights to a non-alcoholic, ready-to-drink cocktail brand, Atypique. The move is likely to help expand its customer base in Canada. In another recent development, Keurig collaborated with BLK & Bold Specialty Beverages to launch BLK & Bold coffees in K-Cup pods for the Keurig brewing system.
Shares of KDP have gained 6.2% year to date compared with the industry’s 4.8% growth.
Image Source: Zacks Investment Research
Q2 in Detail
Adjusted earnings of 39 cents per share grew 2.6% year over year and met the Zacks Consensus Estimate.
Net sales of $3,554 million surpassed the Zacks Consensus Estimate of $3,391 million. The reported figure jumped 13.2% from the year-ago quarter’s level and 13.5% on a constant-currency basis (cc). The upside was driven by growth in the Packaged Beverages, Beverage Concentrates and Latin America Beverages segments, as well as higher volumes and better pricing. Net price realization grew 10.4% with a higher volume/mix of 3.1%.
In the reported quarter, Keurig Dr Pepper’s in-market performance in the Liquid Refreshment Beverages (LRB) category remained sturdy, with retail dollar consumption growing 9.9% and market share expanding above 92% of KDP's cold beverage portfolio. This mainly reflected strength in CSDs3, premium unflavored water, coconut water, seltzers, teas, apple juice, vegetable juice and fruit drinks.
Also, strength in Dr Pepper, Sunkist, Canada Dry, A&W and Squirt CSDs, CORE Hydration, Vita Coco, Polar seltzers, Snapple, Hawaiian Punch, and Mott's aided the results.
In coffee, retail dollar consumption of single-serve pods manufactured by Keurig Dr Pepper rose 3.8% in channels tracked by Iri, driven by improved pricing in partner and KDP-owned and licensed brands. KDP’s coffee systems’ sales increased 9%, owing to the company’s completion of the coffee recovery program. Also, KDP’s manufactured share was solid at 81.8%.
Adjusted gross profit rose 10% year over year to $1,945 million, while the adjusted gross margin contracted 180 basis points (bps) to 54.7%. This was mainly due to higher transportation, warehousing and retail labor costs. Adjusted operating income dipped 1.2% to $832 million in the quarter, whereas the adjusted operating margin contracted 330 bps to 23.4%.
Segmental Details
Sales in the Coffee Systems segment rose 8.5% year over year to $1,195 million, driven by the early completion of the coffee recovery program, which led the company to rebuild retailer and partner inventories, and restore the customer service levels. At cc, net sales increased 9.1%.
Net price realization grew 5.8%, offset by a higher volume/mix of 3.3%. Net price realization was backed by pricing actions in pod and brewer. The volume/mix decline was due to pod volume growth of 4.7%, which offset the brewer volume decline of 4.2%.
Sales in the Packaged Beverages segment totaled $1,689 million, up 12.8% year over year, gaining from a favorable volume/mix of 1.9% and a higher net price realization of 11%. Segment sales rose 12.9% at cc. The segment benefited from growth in CSDs, CORE Hydration, Snapple, Polar seltzers, Vita Coco, Mott's and Hawaiian Punch.
Sales in the Beverage Concentrates segment rose 22.7% year over year to $460 million, gaining from a favorable net price realization of 19.2% and a volume/mix rise of 3.7%. At cc, the segment’s net sales increased 22.9%. While total shipment volume rose 3.5% year over year on increases in Canada Dry and Dr Pepper, bottler case sales volume remained flat year over year.
The Latin America Beverages segment’s sales advanced 26.5% on a reported and cc basis to $210 million. This was mainly caused by volume/mix growth of 12% and an improved net price realization of 14.5%. Strength in Peñafiel, Clamato, Squirt and Mott's aided quarterly segmental growth.
Financials
As of Jun 30, 2022, Keurig Dr Pepper’s cash and cash equivalents were $552 million. KDP also had long-term obligations of $11,555 million and a total stockholders’ equity of $25,391 million (excluding non-controlling interest).
Net cash provided by operating activities totaled $1,339 million at the end of the six months ending Jun 30. The Zacks Rank #3 (Hold) company generated a free cash flow of $599 million in the reported quarter.
In the second quarter, the company bought back 2.5 million shares for $87.6 million. It has $3.9 billion remaining under its share repurchase authorization valid till Dec 31, 2025.
Keurig Dr Pepper, Inc Price, Consensus and EPS Surprise
Keurig Dr Pepper, Inc price-consensus-eps-surprise-chart | Keurig Dr Pepper, Inc Quote
Outlook
Driven by the robust quarterly results, Keurig Dr Pepper has raised its sales view for 2022. Management projects net sales (cc) to grow in the low-double-digit range compared with the earlier stated increase in the high-single digits.
Management has reaffirmed the adjusted earnings per share view of mid-single-digit growth for 2022. Adjusted earnings per share growth are expected to be in the high-single digits for the second half of 2022.
Stocks to Consider
We highlighted some better-ranked stocks from the broader Consumer Staples space, namely Sysco Corporation (SYY - Free Report) , Chef Warehouse (CHEF - Free Report) and Campbell Soup (CPB - Free Report) .
Sysco, the marketer and distributor of food and related products, currently sports a Zacks Rank #1 (Strong Buy). SYY has a trailing two-quarter earnings surprise of 93.75%, on average. It has an expected long-term earnings growth rate of 11%. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Sysco’s current financial-year sales and earnings per share suggests growth of 35.9% and 145.5%, respectively, from the year-ago reported numbers. The company has a trailing four-quarter earnings surprise of 3.7%, on average.
Chef’s Warehouse, a distributor of specialty food products in the United States, currently flaunts a Zacks Rank #1. CHEF has a trailing four-quarter earnings surprise of 372.3%, on average.
The Zacks Consensus Estimate for Chef Warehouse’s current financial-year sales and earnings per share suggests growth of 38.1% and 2540%, respectively, from the year-ago reported numbers.
Campbell Soup, the manufacturer and marketer of high-quality, branded convenience food products, currently carries a Zacks Rank #2 (Buy). It has an expected long-term earnings growth rate of 1.6%.
The Zacks Consensus Estimate for Campbell Soup’s current financial-year sales and earnings per share suggests growth of 10.1% and 15.4%, respectively, from the year-ago reported numbers. CPB has a trailing two-quarter earnings surprise of 10.8%, on average.