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Keurig (KDP) Eyes Sustained Organic Growth: Stock to Gain
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Keurig Dr Pepper (KDP - Free Report) has been keen on delivering organic sales growth over the years. While most of the growth across categories and organic sales in recent quarters has been pricing-driven, the company remains confident about delivering sustained organic growth in the quarters ahead. KDP has been witnessing less elastic volume growth for the past few quarters. Also, demand trends, although strong, have been reflecting the impacts of pressures on consumers.
Although the company expects pricing-led gains to moderate in the second half of 2023, it anticipates continued momentum in organic sales due to its efforts to create value across three key dimensions. These dimensions mainly comprise growth in core brands, enriching the portfolio and effective omnichannel, selling and distribution systems.
The company’s focus on core brands revolves around marketing and brand renovation. Driven by its efforts, Dr Pepper was the largest share gainer in the CSD category in the second quarter due to the success of Strawberries & Cream and the continued strong momentum of Dr Pepper Zero Sugar. The Keurig brand also outperformed, driven by its multicultural appeal.
Keurig’s emphasis on enriching the portfolio relates to filling portfolio white spaces through innovation and external partnerships. Gains from recent innovations and effective in-market execution, along with the contribution from its sales and distribution partnership for C4 Energy, were well reflected in second-quarter results. We note that the C4 distribution transition is proceeding well. The company remains confident about the growth potential of C4.
Keurig’s approach to enhancing the effectiveness of its omnichannel, selling and distribution systems is well on track. The success of its selling and distribution engine is evident from the 60% increase in the total points of distribution recorded in the second quarter across KDP-distributed geographies. Continued brand velocity and share gains for C4 underpin growth in distribution points witnessed in the second quarter.
These three key dimensions position the company for sustained organic sales growth in the near term. Additionally, the resulting momentum has been well-reflected in its share price, with the stock outperforming the industry and the market. Shares of this Zacks Rank #2 (Buy) company have risen 3% in the past three months against the industry’s decline of 1.5%. The stock also compared favorably with the sector and the S&P 500’s declines of 5.2% and 2.7%, respectively, in the same period.
Further, optimism about the stock is reflected in its forward estimates, which suggest notable growth. The Zacks Consensus Estimate for KDP’s 2023 sales and earnings implies growth of 6% each from the year-ago period’s reported numbers.
Image Source: Zacks Investment Research
Upbeat View
Following second-quarter results, Keurig Dr Pepper raised its sales view for 2023. The company expects sales growth of 5-6%, which is higher than the 5% projected earlier. For adjusted earnings, KDP expects an increase of 6-7%.
Other Key Picks
We have highlighted three other top-ranked stocks from the Consumer Staple sector, namely Coca-Cola (KO - Free Report) , Constellation Brands (STZ - Free Report) and Mondelez International (MDLZ - Free Report) .
The Zacks Consensus Estimate for Coca-Cola’s current financial-year sales and earnings per share suggests growth of 4.7% and 6.1%, respectively, from the year-ago period’s reported figures. KO has a trailing four-quarter earnings surprise of 5.2%, on average.
Constellation Brands has a trailing four-quarter earnings surprise of 4.4%, on average. It currently carries a Zacks Rank #2. Shares of STZ have risen 1.5% in the past three months.
The Zacks Consensus Estimate for Constellation Brands’ current financial-year sales and earnings suggests growth of 6.8% and 8.9%, respectively, from the year-ago period's reported figures.
Mondelez has a trailing four-quarter earnings surprise of 8.3%, on average. It currently carries a Zacks Rank #2. Shares of MDLZ have declined 3.2% in the past three months.
The Zacks Consensus Estimate for Mondelez’s current financial-year sales and earnings suggests growth of 14.6% and 9.8%, respectively, from the year-ago period's reported figures.
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Keurig (KDP) Eyes Sustained Organic Growth: Stock to Gain
Keurig Dr Pepper (KDP - Free Report) has been keen on delivering organic sales growth over the years. While most of the growth across categories and organic sales in recent quarters has been pricing-driven, the company remains confident about delivering sustained organic growth in the quarters ahead. KDP has been witnessing less elastic volume growth for the past few quarters. Also, demand trends, although strong, have been reflecting the impacts of pressures on consumers.
Although the company expects pricing-led gains to moderate in the second half of 2023, it anticipates continued momentum in organic sales due to its efforts to create value across three key dimensions. These dimensions mainly comprise growth in core brands, enriching the portfolio and effective omnichannel, selling and distribution systems.
The company’s focus on core brands revolves around marketing and brand renovation. Driven by its efforts, Dr Pepper was the largest share gainer in the CSD category in the second quarter due to the success of Strawberries & Cream and the continued strong momentum of Dr Pepper Zero Sugar. The Keurig brand also outperformed, driven by its multicultural appeal.
Keurig’s emphasis on enriching the portfolio relates to filling portfolio white spaces through innovation and external partnerships. Gains from recent innovations and effective in-market execution, along with the contribution from its sales and distribution partnership for C4 Energy, were well reflected in second-quarter results. We note that the C4 distribution transition is proceeding well. The company remains confident about the growth potential of C4.
Keurig’s approach to enhancing the effectiveness of its omnichannel, selling and distribution systems is well on track. The success of its selling and distribution engine is evident from the 60% increase in the total points of distribution recorded in the second quarter across KDP-distributed geographies. Continued brand velocity and share gains for C4 underpin growth in distribution points witnessed in the second quarter.
These three key dimensions position the company for sustained organic sales growth in the near term. Additionally, the resulting momentum has been well-reflected in its share price, with the stock outperforming the industry and the market. Shares of this Zacks Rank #2 (Buy) company have risen 3% in the past three months against the industry’s decline of 1.5%. The stock also compared favorably with the sector and the S&P 500’s declines of 5.2% and 2.7%, respectively, in the same period.
Further, optimism about the stock is reflected in its forward estimates, which suggest notable growth. The Zacks Consensus Estimate for KDP’s 2023 sales and earnings implies growth of 6% each from the year-ago period’s reported numbers.
Image Source: Zacks Investment Research
Upbeat View
Following second-quarter results, Keurig Dr Pepper raised its sales view for 2023. The company expects sales growth of 5-6%, which is higher than the 5% projected earlier. For adjusted earnings, KDP expects an increase of 6-7%.
Other Key Picks
We have highlighted three other top-ranked stocks from the Consumer Staple sector, namely Coca-Cola (KO - Free Report) , Constellation Brands (STZ - Free Report) and Mondelez International (MDLZ - Free Report) .
Coca-Cola currently carries a Zacks Rank #2. Shares of KO have declined 6.8% in the past three months. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Coca-Cola’s current financial-year sales and earnings per share suggests growth of 4.7% and 6.1%, respectively, from the year-ago period’s reported figures. KO has a trailing four-quarter earnings surprise of 5.2%, on average.
Constellation Brands has a trailing four-quarter earnings surprise of 4.4%, on average. It currently carries a Zacks Rank #2. Shares of STZ have risen 1.5% in the past three months.
The Zacks Consensus Estimate for Constellation Brands’ current financial-year sales and earnings suggests growth of 6.8% and 8.9%, respectively, from the year-ago period's reported figures.
Mondelez has a trailing four-quarter earnings surprise of 8.3%, on average. It currently carries a Zacks Rank #2. Shares of MDLZ have declined 3.2% in the past three months.
The Zacks Consensus Estimate for Mondelez’s current financial-year sales and earnings suggests growth of 14.6% and 9.8%, respectively, from the year-ago period's reported figures.