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Can KDP Sustain Its Growth Amid Cost Pressures & Coffee Headwinds?
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Key Takeaways
Keurig Dr Pepper's Refreshment Beverages segment posted double-digit sales growth in Q3 2025.
The U.S. Coffee unit saw a 4% volume/mix decline amid lower brewer shipments and cautious retailers.
Cost inflation and tariffs persist, but pricing actions and efficiency programs help cushion KDP's margins.
Keurig Dr Pepper Inc. (KDP - Free Report) continues to demonstrate impressive strength in its Refreshment Beverages segment, which remains the primary engine of growth. In third-quarter 2025, sales rose double-digits, fueled by strong demand across carbonated soft drinks, energy and sports hydration. Flagship brand Dr Pepper extended its leadership with a ninth consecutive year of share gains, while innovations such as Dr Pepper Zero Sugar, Canada Dry Fruit Splash and the Snapple glass relaunch boosted consumer engagement. Meanwhile, fast-growing partnerships with GHOST, C4 and Electrolit are helping KDP capture meaningful share in the high-growth energy and hydration categories.
While beverages continue to perform well, KDP’s U.S. Coffee segment remains under pressure. Volume/mix declined roughly 4% in third-quarter 2025, as lower brewer shipments and cautious retailer inventory management weighed on results. However, while pricing supported modest revenue growth, category elasticity and slower household replenishment trends constrained profitability. Management remains optimistic about the long-term outlook, supported by new product innovations such as the Keurig Coffee Collective, the K-Crema brewer and the upcoming Keurig Alta system with K-Rounds, but these initiatives will take time to fully offset the current softness.
KDP continues to navigate a challenging cost environment marked by elevated green coffee prices, tariffs and supply chain inflation. Management noted that these headwinds are expected to intensify into the fourth quarter of 2025, particularly impacting the coffee business. The company is actively pursuing mitigation measures, including targeted pricing actions, productivity programs and strategic cost discipline, but volatility in input costs and currency movements remains an earnings risk. Despite these pressures, KDP’s efficiency initiatives and scale advantages provide some cushion against rising costs.
Despite near-term challenges, management reaffirmed its confidence in KDP’s long-term growth algorithm of mid-single-digit net sales and high-single-digit adjusted EPS growth. The company’s innovation pipeline, category diversification and disciplined execution position it well to sustain momentum.
Strategic portfolio moves, such as the acquisition of Dyla Brands and the planned integration of JDE Peet’s, followed by a company split, are expected to unlock further value. With a resilient brand portfolio, strong cash generation and a clear focus on profitable growth, KDP appears well-equipped to weather short-term headwinds while advancing its transformation into a stronger, more agile beverage leader.
Keurig Dr Pepper’s Zacks Rank & Share Price Performance
Shares of this Zacks Rank #3 (Hold) company have declined 23.2% in the past three months, underperforming both the industry and the broader Consumer Staples sector, which lost 1.2% and 6.9%, respectively. However, the stock also lagged the S&P 500, which gained 7.5% in the same period.
KDP Stock's Three-Month Performance
Image Source: Zacks Investment Research
Is KDP a Value Play Stock?
Keurig Dr Pepper currently trades at a forward 12-month P/E ratio of 12.42X, lower than the industry average of 17.74X and the sector average of 16.96X. This valuation positions the stock at a modest discount relative to both its direct peers and the broader consumer staples sector.
The Zacks Consensus Estimate for Ambev’s current financial-year sales indicates year-over-year growth of 1.5%, while the EPS estimate suggests no change from the year-ago reported number. ABEV delivered a trailing four-quarter negative earnings surprise of 4.2%, on average.
PepsiCo Inc. (PEP - Free Report) is one of the leading global food and beverage companies. It currently has a Zacks Rank of 2.
PepsiCo delivered a trailing four-quarter earnings surprise of 1%, on average. The Zacks Consensus Estimate for PEP’s current financial-year sales indicates growth of 1.8% from the year-ago reported number and that for EPS suggests a 0.6% decline.
Fomento Economico Mexicano (FMX - Free Report) , alias FEMSA, operates as a franchise bottler of Coca-Cola trademark beverages worldwide. FMX has a Zacks Rank of 2 at present.
The Zacks Consensus Estimate for FEMSA’s current financial-year sales implies growth of 2.5%, while the EPS estimate indicates a year-over-year decline of 4.8% from the year-ago reported number. FEMSA delivered a trailing four-quarter negative earnings surprise of 28.1%, on average.
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Can KDP Sustain Its Growth Amid Cost Pressures & Coffee Headwinds?
Key Takeaways
Keurig Dr Pepper Inc. (KDP - Free Report) continues to demonstrate impressive strength in its Refreshment Beverages segment, which remains the primary engine of growth. In third-quarter 2025, sales rose double-digits, fueled by strong demand across carbonated soft drinks, energy and sports hydration. Flagship brand Dr Pepper extended its leadership with a ninth consecutive year of share gains, while innovations such as Dr Pepper Zero Sugar, Canada Dry Fruit Splash and the Snapple glass relaunch boosted consumer engagement. Meanwhile, fast-growing partnerships with GHOST, C4 and Electrolit are helping KDP capture meaningful share in the high-growth energy and hydration categories.
While beverages continue to perform well, KDP’s U.S. Coffee segment remains under pressure. Volume/mix declined roughly 4% in third-quarter 2025, as lower brewer shipments and cautious retailer inventory management weighed on results. However, while pricing supported modest revenue growth, category elasticity and slower household replenishment trends constrained profitability. Management remains optimistic about the long-term outlook, supported by new product innovations such as the Keurig Coffee Collective, the K-Crema brewer and the upcoming Keurig Alta system with K-Rounds, but these initiatives will take time to fully offset the current softness.
KDP continues to navigate a challenging cost environment marked by elevated green coffee prices, tariffs and supply chain inflation. Management noted that these headwinds are expected to intensify into the fourth quarter of 2025, particularly impacting the coffee business. The company is actively pursuing mitigation measures, including targeted pricing actions, productivity programs and strategic cost discipline, but volatility in input costs and currency movements remains an earnings risk. Despite these pressures, KDP’s efficiency initiatives and scale advantages provide some cushion against rising costs.
Despite near-term challenges, management reaffirmed its confidence in KDP’s long-term growth algorithm of mid-single-digit net sales and high-single-digit adjusted EPS growth. The company’s innovation pipeline, category diversification and disciplined execution position it well to sustain momentum.
Strategic portfolio moves, such as the acquisition of Dyla Brands and the planned integration of JDE Peet’s, followed by a company split, are expected to unlock further value. With a resilient brand portfolio, strong cash generation and a clear focus on profitable growth, KDP appears well-equipped to weather short-term headwinds while advancing its transformation into a stronger, more agile beverage leader.
Keurig Dr Pepper’s Zacks Rank & Share Price Performance
Shares of this Zacks Rank #3 (Hold) company have declined 23.2% in the past three months, underperforming both the industry and the broader Consumer Staples sector, which lost 1.2% and 6.9%, respectively. However, the stock also lagged the S&P 500, which gained 7.5% in the same period.
KDP Stock's Three-Month Performance
Image Source: Zacks Investment Research
Is KDP a Value Play Stock?
Keurig Dr Pepper currently trades at a forward 12-month P/E ratio of 12.42X, lower than the industry average of 17.74X and the sector average of 16.96X. This valuation positions the stock at a modest discount relative to both its direct peers and the broader consumer staples sector.
KDP P/E Ratio (Forward 12 Months)
Image Source: Zacks Investment Research
Stocks to Consider
Ambev (ABEV - Free Report) is engaged in producing, distributing and selling beer, carbonated soft drinks and other non-alcoholic and non-carbonated products in many countries across the Americas. ABEV currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Ambev’s current financial-year sales indicates year-over-year growth of 1.5%, while the EPS estimate suggests no change from the year-ago reported number. ABEV delivered a trailing four-quarter negative earnings surprise of 4.2%, on average.
PepsiCo Inc. (PEP - Free Report) is one of the leading global food and beverage companies. It currently has a Zacks Rank of 2.
PepsiCo delivered a trailing four-quarter earnings surprise of 1%, on average. The Zacks Consensus Estimate for PEP’s current financial-year sales indicates growth of 1.8% from the year-ago reported number and that for EPS suggests a 0.6% decline.
Fomento Economico Mexicano (FMX - Free Report) , alias FEMSA, operates as a franchise bottler of Coca-Cola trademark beverages worldwide. FMX has a Zacks Rank of 2 at present.
The Zacks Consensus Estimate for FEMSA’s current financial-year sales implies growth of 2.5%, while the EPS estimate indicates a year-over-year decline of 4.8% from the year-ago reported number. FEMSA delivered a trailing four-quarter negative earnings surprise of 28.1%, on average.