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Dr Pepper Snapple (DPS) Q3 Results Strong, View Impressive

CCE KO DPS PEP

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On Nov 14, we issued an updated research report on Dr Pepper Snapple Group Inc. (DPS - Free Report) – a manufacturer and distributor of flavored, carbonated and non-carbonated beverages including ready-to-drink teas, juices, waters, etc.

Dr Pepper Snapple reported third-quarter adjusted earnings per share (EPS) of $1.17 that beat the Zacks Consensus Estimate of $1.11 by 5.4%. Moreover, earnings increased 8% year over year, courtesy of strong top-line and margin expansion.

Net sales of $1.680 billion were also ahead of the Zacks Consensus Estimate of $1.659 million by 1.3%. Net sales rose 3.1% year over year as favorable product/package mix, price hikes and sales volume offset currency headwinds.

Solid execution, pricing gains, innovation, powerful marketing programs and productivity improvements have been driving sales and earnings for Dr Pepper Snapple since 2015.

The strong performance continued in the first nine months of 2016 with both the top and the bottom line beating estimates in the first, second and third quarter of 2016 as well. Earnings rose 11%, while sales rose 3% in the first nine months of 2016, both on year-over-year basis.

Moreover, the company raised its earnings guidance thrice for 2016 following better-than-expected results in the first nine months of the year. The company now expects earnings in the range of $4.32 to $4.40 per share, higher than its previously estimated $4.27 to $4.35. Net sales growth of approximately 2% is anticipated for 2016.

However, currency headwinds have been hurting sales for quite sometime now. Currency headwinds hurt sales by 1% in the third quarter of 2016.

Notably, currency headwinds and increased marketing expenses are expected to hurt profits in the fourth quarter. However, productivity benefits from Rapid Continuous Improvement  (“RCI”) program will help offset a portion of these increases. Also, the company expects to benefit from lower fuel costs. Foreign exchange is expected to be a 1% headwind for revenues and approximately 3% for core EPS in 2016.

Meanwhile, some of Dr Pepper Snapple’s industry peers have released their third-quarter number like Coca-Cola European Partners plc (CCE - Free Report) , Pepsico, Inc. (PEP - Free Report) and The Coca-Cola Company (KO - Free Report) . All three companies surpassed the Zacks Consensus Estimate for earnings.

Dr Pepper Snapple carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


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