A month has gone by since the last earnings report for Dr Pepper Snapple Group, Inc . Shares have added about 1.5% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is DPS due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Dr Pepper Snapple Group Inc.’s fourth-quarter earnings remained in line with the Zacks Consensus Estimate while revenues lagged the same.
Recently, the company reported its acquisition agreement with the well-known coffee maker Keurig Green Mountain, Inc. Per the terms of the transaction, Dr Pepper will be acquired by Keurig and the company’s shareholders will receive a special cash dividend of $130.75 per share, making the deal worth $18.7 billion. Dr Pepper’s shareholders will retain 13% ownership of the combined entity, while Keurig shareholders will own the remaining 87%. The transaction is scheduled to close in the second quarter of 2018.
In the fourth quarter, adjusted earnings per share of $1.17 grew 12.5% year over year. Net sales of $1.64 billion missed the consensus estimate of $1.66 million by 1.2% but rose 4.1% from the year-ago quarter.
Gross profit of $980 million was up 3% from the prior-year quarter.
For 2017, net sales were $6.7 billion, up 3.9% from the prior year. Net sales increased due to favorable product and package mix.
Gross Profit increased 3.6% year over year to nearly $4 billion in the quarter. Net income also rose 27% from the year-ago quarter to $1.1 billion.
The company reported adjusted earnings per share of $5.89 in 2017, an increase of 29.7% from the prior year.
Let’s delve deeper into the numbers.
Dr Pepper’s sales volume is measured in two ways: 1) sales volume and 2) bottler case sales (BCS) volume. Sales volume represents concentrates and finished beverages sold to bottlers, retailers and distributors. BCS includes the sale of finished packaged beverages by the company and its bottlers to retailers and independent distributors.
In 2017, BCS volumes increased 1% year over year. In the United States and Canada, volume was 1% higher, and in Mexico and Caribbean, volume increased 3% compared with the prior year. Branded CSD volume was up 1%, while NCB volume increased 4% from the prior-year quarter.
Beverage Concentrates segment revenues were up 3.7% year over year on higher pricing, a 2% increase in concentrate case sales and lower discounts.
Packaged Beverage segment sales increased 3.7% from the prior year on favorable product and package mix.
Latin America Beverage segment revenues also increased 5.9% year over year owing to increased sales volume and higher pricing, partially offset by unfavorable package and product mix, and unfavorable foreign currency translation.
Cash and cash equivalents were $158 million as of Dec 31, 2017, compared with $1,787 million at 2016-end. Long-term obligations totaled $4.4 billion in 2017, slightly lower than $4.5 billion in 2016.
Capital Expenditures were $202 million in 2017, compared with $180 million in 2016.
Net cash provided by operating activities totaled nearly $1 billion in 2017, up 8% year over year.
The company declared aggregate dividends per share of $2.32 in 2017 compared with $2.12 in 2016.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There have been two revisions lower for the current quarter.
At this time, DPS has an average Growth Score of C, though it is lagging a lot on the momentum front with an F. The stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for growth based on our styles scores.
Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Notably, DPS has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.