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Keurig Dr Pepper (KDP) Q3 Earnings Meet, Sales Lag Estimates
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Keurig Dr Pepper Inc. (KDP - Free Report) has reported third-quarter 2022 results, wherein the bottom line was in line with the Zacks Consensus Estimate, while sales missed the same. Both metrics improved year over year.
Despite the challenging environment, results have gained from the solid performance in its cold beverages, driven by strong in-market execution and increased marketing investment. Also, a recovery in the coffee business bodes well. Management expects the coffee business to deliver strong sales and earnings growth in the fourth quarter.
Shares of KDP have gained 1.2% in the past three months compared with the industry’s 2.2% growth. However, shares of the company fell more than 2% before the trading session on Oct 27, due to continued inflationary pressures.
Image Source: Zacks Investment Research
Q3 in Detail
Adjusted earnings of 46 cents per share grew 4.5% year over year and met the Zacks Consensus Estimate.
Net sales of $3,622 million lagged the Zacks Consensus Estimate of $3,633 million. However, the reported figure jumped 11.4% from the year-ago quarter and 11.8% on a constant-currency basis (cc). The upside was driven by growth in the Packaged Beverages, Beverage Concentrates, Latin America Beverages and Coffee Systems segments. Net price realization grew 12.1%, with a lower volume/mix of 0.3%.
In the reported quarter, Keurig Dr Pepper’s in-market performance in the Liquid Refreshment Beverages category remained sturdy, with retail dollar consumption growing 11.2% and market share expanding above 92% of KDP's cold beverage portfolio. This mainly reflected strength in CSDs, premium unflavored water, seltzers, teas, apple juice and fruit drinks.
Also, strength in Dr Pepper, Crush, Canada Dry, A&W and Squirt CSDs, CORE Hydration, Vita Coco, Polar seltzers, Snapple, Hawaiian Punch, and Mott's aided the results.
In coffee, the retail dollar consumption of single-serve pods manufactured by Keurig Dr Pepper rose 4% in channels tracked by Iri, driven by higher pricing in partner and KDP-owned and licensed brands. Also, KDP’s manufactured share was solid at 81.7%.
Adjusted gross profit rose 8.6% year over year to $1,985 million, while the adjusted gross margin contracted 160 basis points (bps) to 54.8%. Adjusted operating income rose 2% to $947 million in the quarter due to higher gross profit, somewhat offset by inflation in transportation, warehousing and retail labor, as well as an increased marketing investment. Meanwhile, the adjusted operating margin contracted 250 bps to 26.1%.
Segmental Details
Sales in the Coffee Systems segment rose 4.7% year over year to $1,209 million, driven by the coffee recovery program. At cc, net sales increased 5.2%. Net price realization grew 7.8%, driven by pricing actions undertaken in late 2021 and the second quarter of 2022, which was partly offset by a lower volume/mix of 2.6%. The volume/mix decline was due to pod volume growth of 3.5%, which offset the brewer volume decline of 15%.
Sales in the Packaged Beverages segment totaled $1,756 million, up 13.5% year over year, gaining from higher net price realization of 13.6%, whereas volume/mix remained flat year over year. Segmental sales rose 13.6% at cc. The segment benefited from growth in CSDs, CORE Hydration, Snapple, Polar seltzers, Evian, Mott's, and Hawaiian Punch.
Sales in the Beverage Concentrates segment rose 17.1% year over year to $459 million, gaining from a favorable net price realization of 16.6% and a volume/mix rise of 0.7%. At cc, the segment’s net sales increased 17.3%. The total shipment volume remained flat year over year on increases in Crush and Dr Pepper, more than offset by the bottler case sales volume decline, particularly in Schweppes and A&W.
The Latin America Beverages segment’s sales advanced 26.9% on a reported and 28.8% on a cc basis to $198 million. This was mainly caused by volume/mix growth of 11.5% and an improved net price realization of 17.3%. Strength in Peñafiel, Clamato, Squirt and Mott's aided quarterly segmental growth.
Keurig Dr Pepper, Inc Price, Consensus and EPS Surprise
As of Sep 30, 2022, Keurig Dr Pepper’s cash and cash equivalents were $925 million. KDP also had long-term obligations of $11,561 million and a total stockholders’ equity of $25,102 million (excluding non-controlling interest).
Net cash provided by operating activities totaled $759 million in the said quarter. The Zacks Rank #3 (Hold) company generated a free cash flow of $686 million in the reported quarter.
On Sep 14, 2022, the company raised its annualized dividend rate from 75 cents to 80 cents, effective with the quarterly dividend payable on Oct 14, 2022.
Outlook
Keurig Dr Pepper has retained its view for 2022. Management projects net sales (cc) growth in the low-double-digit range and adjusted earnings per share growth in the mid-single digits for 2022.
Constellation Brands currently has a Zacks Rank #2 (Buy) and an expected long-term earnings growth rate of 11.1%. STZ has a trailing four-quarter earnings surprise of 10.5%, on average. The company has gained 5.6% in the past year.
The Zacks Consensus Estimate for Constellation Brands’ current financial-year sales suggests growth of 3.5% from the year-ago reported numbers, whereas the same for earnings suggests a decline of 5.1%. The consensus mark for STZ’s earnings per share has moved down 5.7% in the past 30 days.
Dutch Bros currently has a Zacks Rank of 2. BROS has a trailing four-quarter earnings surprise of 53%, on average. It has a long-term earnings growth rate of 32%. The company has declined 48.6% in the past year.
The Zacks Consensus Estimate for Dutch Bros’ current financial-year sales suggests growth of 51.2% from the prior-year reported number, whereas the same for earnings suggests a decline of 73.9%. The consensus mark for BROS’ earnings per share has moved down 25% in the past 30 days.
Limoneira currently carries a Zacks Rank #2. LMNR has a trailing two-quarter earnings surprise of 13.3%, on average. It has a long-term earnings growth rate of 15%. The company has declined 20.4% in the past year.
The Zacks Consensus Estimate for Limoneira’s current financial-year loss per share suggests growth of 67.9% from a loss per share of 28 cents reported in the year-ago quarter, whereas the same for sales suggests a decline of 1.6%. The consensus estimate for LMNR’s loss per share has narrowed by 2 cents in the past 30 days.
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Keurig Dr Pepper (KDP) Q3 Earnings Meet, Sales Lag Estimates
Keurig Dr Pepper Inc. (KDP - Free Report) has reported third-quarter 2022 results, wherein the bottom line was in line with the Zacks Consensus Estimate, while sales missed the same. Both metrics improved year over year.
Despite the challenging environment, results have gained from the solid performance in its cold beverages, driven by strong in-market execution and increased marketing investment. Also, a recovery in the coffee business bodes well. Management expects the coffee business to deliver strong sales and earnings growth in the fourth quarter.
Shares of KDP have gained 1.2% in the past three months compared with the industry’s 2.2% growth. However, shares of the company fell more than 2% before the trading session on Oct 27, due to continued inflationary pressures.
Image Source: Zacks Investment Research
Q3 in Detail
Adjusted earnings of 46 cents per share grew 4.5% year over year and met the Zacks Consensus Estimate.
Net sales of $3,622 million lagged the Zacks Consensus Estimate of $3,633 million. However, the reported figure jumped 11.4% from the year-ago quarter and 11.8% on a constant-currency basis (cc). The upside was driven by growth in the Packaged Beverages, Beverage Concentrates, Latin America Beverages and Coffee Systems segments. Net price realization grew 12.1%, with a lower volume/mix of 0.3%.
In the reported quarter, Keurig Dr Pepper’s in-market performance in the Liquid Refreshment Beverages category remained sturdy, with retail dollar consumption growing 11.2% and market share expanding above 92% of KDP's cold beverage portfolio. This mainly reflected strength in CSDs, premium unflavored water, seltzers, teas, apple juice and fruit drinks.
Also, strength in Dr Pepper, Crush, Canada Dry, A&W and Squirt CSDs, CORE Hydration, Vita Coco, Polar seltzers, Snapple, Hawaiian Punch, and Mott's aided the results.
In coffee, the retail dollar consumption of single-serve pods manufactured by Keurig Dr Pepper rose 4% in channels tracked by Iri, driven by higher pricing in partner and KDP-owned and licensed brands. Also, KDP’s manufactured share was solid at 81.7%.
Adjusted gross profit rose 8.6% year over year to $1,985 million, while the adjusted gross margin contracted 160 basis points (bps) to 54.8%. Adjusted operating income rose 2% to $947 million in the quarter due to higher gross profit, somewhat offset by inflation in transportation, warehousing and retail labor, as well as an increased marketing investment. Meanwhile, the adjusted operating margin contracted 250 bps to 26.1%.
Segmental Details
Sales in the Coffee Systems segment rose 4.7% year over year to $1,209 million, driven by the coffee recovery program. At cc, net sales increased 5.2%. Net price realization grew 7.8%, driven by pricing actions undertaken in late 2021 and the second quarter of 2022, which was partly offset by a lower volume/mix of 2.6%. The volume/mix decline was due to pod volume growth of 3.5%, which offset the brewer volume decline of 15%.
Sales in the Packaged Beverages segment totaled $1,756 million, up 13.5% year over year, gaining from higher net price realization of 13.6%, whereas volume/mix remained flat year over year. Segmental sales rose 13.6% at cc. The segment benefited from growth in CSDs, CORE Hydration, Snapple, Polar seltzers, Evian, Mott's, and Hawaiian Punch.
Sales in the Beverage Concentrates segment rose 17.1% year over year to $459 million, gaining from a favorable net price realization of 16.6% and a volume/mix rise of 0.7%. At cc, the segment’s net sales increased 17.3%. The total shipment volume remained flat year over year on increases in Crush and Dr Pepper, more than offset by the bottler case sales volume decline, particularly in Schweppes and A&W.
The Latin America Beverages segment’s sales advanced 26.9% on a reported and 28.8% on a cc basis to $198 million. This was mainly caused by volume/mix growth of 11.5% and an improved net price realization of 17.3%. Strength in Peñafiel, Clamato, Squirt and Mott's aided quarterly segmental 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 Sep 30, 2022, Keurig Dr Pepper’s cash and cash equivalents were $925 million. KDP also had long-term obligations of $11,561 million and a total stockholders’ equity of $25,102 million (excluding non-controlling interest).
Net cash provided by operating activities totaled $759 million in the said quarter. The Zacks Rank #3 (Hold) company generated a free cash flow of $686 million in the reported quarter.
On Sep 14, 2022, the company raised its annualized dividend rate from 75 cents to 80 cents, effective with the quarterly dividend payable on Oct 14, 2022.
Outlook
Keurig Dr Pepper has retained its view for 2022. Management projects net sales (cc) growth in the low-double-digit range and adjusted earnings per share growth in the mid-single digits for 2022.
Stocks to Consider
We highlighted some better-ranked stocks from the broader Consumer Staples space, namely Constellation Brands (STZ - Free Report) , Dutch Bros (BROS - Free Report) and Limoneira Co (LMNR - Free Report) .
Constellation Brands currently has a Zacks Rank #2 (Buy) and an expected long-term earnings growth rate of 11.1%. STZ has a trailing four-quarter earnings surprise of 10.5%, on average. The company has gained 5.6% in the past year.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Constellation Brands’ current financial-year sales suggests growth of 3.5% from the year-ago reported numbers, whereas the same for earnings suggests a decline of 5.1%. The consensus mark for STZ’s earnings per share has moved down 5.7% in the past 30 days.
Dutch Bros currently has a Zacks Rank of 2. BROS has a trailing four-quarter earnings surprise of 53%, on average. It has a long-term earnings growth rate of 32%. The company has declined 48.6% in the past year.
The Zacks Consensus Estimate for Dutch Bros’ current financial-year sales suggests growth of 51.2% from the prior-year reported number, whereas the same for earnings suggests a decline of 73.9%. The consensus mark for BROS’ earnings per share has moved down 25% in the past 30 days.
Limoneira currently carries a Zacks Rank #2. LMNR has a trailing two-quarter earnings surprise of 13.3%, on average. It has a long-term earnings growth rate of 15%. The company has declined 20.4% in the past year.
The Zacks Consensus Estimate for Limoneira’s current financial-year loss per share suggests growth of 67.9% from a loss per share of 28 cents reported in the year-ago quarter, whereas the same for sales suggests a decline of 1.6%. The consensus estimate for LMNR’s loss per share has narrowed by 2 cents in the past 30 days.