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Can KDP's International Business Sustain Double-Digit Sales Growth?
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Key Takeaways
KDP International sales rose 12.4% in Q2, with volume mix adding 6.5 points and pricing 5.9 points.
Keurig Dr Pepper sees improving Mexico demand as tax effects ease and distribution expands.
KDP's Canadian portfolio and coffee strength support growth, while commodity inflation pressures profits.
Keurig Dr Pepper (KDP - Free Report) international business is showing encouraging momentum, supported by broad-based strength across Mexico and Canada. In Mexico, improving volume trends are complementing pricing as the impact of the beverage tax eases, while distribution expansion and stronger in-store execution are supporting key beverage platforms. Canada is also contributing through healthy demand across carbonated soft drinks, alcohol alternatives, energy drinks and ready-to-drink tea. Coffee trends remain constructive as well, reflecting continued strength in the Keurig ecosystem.
The momentum was evident in the second quarter, when KDP International net sales increased 12.4% year over year. Volume mix contributed 6.5 percentage points to growth, while net price realization added 5.9 points, indicating that the improvement was not solely dependent on pricing. However, segment operating income was flat from the prior-year period, as benefits from higher sales and productivity savings were offset by green coffee inflation, the Mexico beverage tax and increased marketing investments.
Sustaining this pace will depend on KDP maintaining a healthy balance between pricing and volume while continuing to broaden distribution and support its brands with effective marketing. Improving demand in Mexico provides an encouraging backdrop, while the diversity of the Canadian beverage portfolio offers another avenue for growth. At the same time, commodity inflation and other cost pressures could limit the extent to which sales gains translate into profit growth. Management nevertheless expects the international business to deliver solid results over the balance of the year.
Keurig Dr Pepper’s Zacks Rank & Share Price Performance
Shares of this Zacks Rank #3 (Hold) company have lost 0.8% in the past three months compared with the industry and the broader Consumer Staples sector’s decline of 0.3% and 1.5%, respectively.
KDP Stock's Past 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 12.81X, lower than the industry average of 19.14X. 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
The Vita Coco Company, Inc. (COCO - Free Report) , a leading beverage company that develops, markets and distributes coconut water and other plant-based beverages, currently sports a Zacks Rank #1 (Strong Buy). COCO delivered a trailing four-quarter earnings surprise of 21.9%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for The Vita Coco Company’s current fiscal-year sales and earnings per share (EPS) calls for growth of 31.6% and 64.7%, respectively, from the year-ago figures.
Darling Ingredients Inc. (DAR - Free Report) , a global developer and producer of sustainable natural ingredients derived from edible and inedible bio-nutrients, currently carries a Zacks Rank of 2 (Buy).
The Zacks Consensus Estimate for Darling’s current fiscal-year sales suggests an 11.5% jump from the prior-year levels. The consensus estimate for current fiscal-year EPS stands at $6.98, which implies a substantial improvement from the year-ago period. DAR delivered a trailing four-quarter earnings surprise of 38.9%, on average.
The Chefs' Warehouse, Inc. (CHEF - Free Report) distributes specialty food and center-of-the-plate products in the United States, the Middle East and Canada. At present, CHEF flaunts a Zacks Rank #1.
The consensus estimate for Chefs' Warehouse’s current fiscal-year sales and earnings implies growth of 10.6% and 33.7%, respectively, from the year-ago reported figures. Chefs' Warehouse delivered a trailing four-quarter earnings surprise of 30.4%, on average.
View the Zacks #1 Rank List
Image: Bigstock
Can KDP's International Business Sustain Double-Digit Sales Growth?
Key Takeaways
Keurig Dr Pepper (KDP - Free Report) international business is showing encouraging momentum, supported by broad-based strength across Mexico and Canada. In Mexico, improving volume trends are complementing pricing as the impact of the beverage tax eases, while distribution expansion and stronger in-store execution are supporting key beverage platforms. Canada is also contributing through healthy demand across carbonated soft drinks, alcohol alternatives, energy drinks and ready-to-drink tea. Coffee trends remain constructive as well, reflecting continued strength in the Keurig ecosystem.
The momentum was evident in the second quarter, when KDP International net sales increased 12.4% year over year. Volume mix contributed 6.5 percentage points to growth, while net price realization added 5.9 points, indicating that the improvement was not solely dependent on pricing. However, segment operating income was flat from the prior-year period, as benefits from higher sales and productivity savings were offset by green coffee inflation, the Mexico beverage tax and increased marketing investments.
Sustaining this pace will depend on KDP maintaining a healthy balance between pricing and volume while continuing to broaden distribution and support its brands with effective marketing. Improving demand in Mexico provides an encouraging backdrop, while the diversity of the Canadian beverage portfolio offers another avenue for growth. At the same time, commodity inflation and other cost pressures could limit the extent to which sales gains translate into profit growth. Management nevertheless expects the international business to deliver solid results over the balance of the year.
Keurig Dr Pepper’s Zacks Rank & Share Price Performance
Shares of this Zacks Rank #3 (Hold) company have lost 0.8% in the past three months compared with the industry and the broader Consumer Staples sector’s decline of 0.3% and 1.5%, respectively.
KDP Stock's Past 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 12.81X, lower than the industry average of 19.14X. 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
The Vita Coco Company, Inc. (COCO - Free Report) , a leading beverage company that develops, markets and distributes coconut water and other plant-based beverages, currently sports a Zacks Rank #1 (Strong Buy). COCO delivered a trailing four-quarter earnings surprise of 21.9%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for The Vita Coco Company’s current fiscal-year sales and earnings per share (EPS) calls for growth of 31.6% and 64.7%, respectively, from the year-ago figures.
Darling Ingredients Inc. (DAR - Free Report) , a global developer and producer of sustainable natural ingredients derived from edible and inedible bio-nutrients, currently carries a Zacks Rank of 2 (Buy).
The Zacks Consensus Estimate for Darling’s current fiscal-year sales suggests an 11.5% jump from the prior-year levels. The consensus estimate for current fiscal-year EPS stands at $6.98, which implies a substantial improvement from the year-ago period. DAR delivered a trailing four-quarter earnings surprise of 38.9%, on average.
The Chefs' Warehouse, Inc. (CHEF - Free Report) distributes specialty food and center-of-the-plate products in the United States, the Middle East and Canada. At present, CHEF flaunts a Zacks Rank #1.
The consensus estimate for Chefs' Warehouse’s current fiscal-year sales and earnings implies growth of 10.6% and 33.7%, respectively, from the year-ago reported figures. Chefs' Warehouse delivered a trailing four-quarter earnings surprise of 30.4%, on average.