Dr Pepper (DPS) Beats Q1 Earnings on Higher Sales Volume - Analyst Blog
Dr Pepper Snapple Group Inc.'s DPS first-quarter 2015 adjusted earnings of 81 cents per share beat the Zacks Consensus Estimate of 76 cents by 6.6%. Earnings increased 9.5% year over year mainly due to higher net sales.
Dr. Pepper Snapple Group Inc. - Earnings Surprise | FindTheCompany
During the quarter, net sales rose 3.8% from the year-ago figure to $1.45 billion on the back of improving sales volumes, and favorable segment and product mix, which were partially offset by currency headwinds. Sales volume increased 2% year over year backed by gains in all the segments. Net sales beat the Zacks Consensus Estimate of $1.42 billion by 2.1%.
Adjusted gross profit went up 2.3% to $851 million due to higher revenues. Adjusted operating income increased 9.3% year over year to $271 million backed by higher sales.
The effective tax rate was 35.5%, lower than 34.4% in the prior-year quarter.
Volumes in Detail
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 packaged beverages by the company and its bottlers to retailers and independent distributors.
Sales volume, as discussed earlier, increased 2% backed by 4% volume gain in Packaged Beverages and 3% gain in the Latin American segment, partly offset by 2% decline in Beverage Concentrates.
In the quarter, BCS volume went up 3% as Carbonated Soft Drinks (CSDs) and non-carbonated beverages (NCB) volume gained 3% and 5%, respectively.
Overall, volumes of the Core 4 brands (Canada Dry, A&W, Sunkist soda and 7UP), including TEN versions, increased 4%, as a double-digit increase in Canada Dry was partially offset by low single-digit declines in Sunkist soda and 7UP. A&W remained flat in the quarter. Squirt increased 15%, and Schweppes increased 8%. These increases were partially offset by 1% decline in the Dr Pepper brand due to continued declines in diet. Fountain foodservice volume, however, increased 1%.
Segment Details
Beverage Concentrates: Dr Pepper's net sales from Beverage Concentrates increased 2% year over year as concentrate price increases implemented at the beginning of the year and lower discounts in the quarter were partially offset by 2% decline in concentrate shipments. Segment operating profit increased 6% year over year due to net sales growth, a planned reduction in marketing investments and lower IT costs.
Packaged Beverages: In the Packaged Beverages segment, net sales rose 5% driven by higher sales volume and favorable product mix were partially offset by increased promotional activity during the quarter. Segment operating profit surged 10% year over year backed by net sales growth and ongoing productivity improvements.
Latin America Beverages: Dr Pepper's net sales from Latin America Beverages increased 14% on a currency neutral basis driven largely by increased sales volumes. Segment operating profit surged 89% (excluding currency) as net sales growth and ongoing productivity improvements were partially offset by increases in logistics costs and other operating expenses.
2015 Outlook
The company expects fiscal 2015 earnings within the range of $3.80 to $3.88. This represents an upside from the 2014 levels. Currency headwinds are expected to hurt sales by 3%.
The company expects net sales to be up 1% from the year-ago level. Management expects currency to hurt sales by 1%.
The company expects lower packaging and commodity costs to reduce the cost of goods sold by 1% in 2015.
Dr Pepper has a Zacks Rank #3 (Hold). Better-ranked stocks in the consumer staples sector include Monster Beverage Corp. MNST, Philip Morris International, Inc. PM and Tyson Foods, Inc. TSN. All these stocks carry a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
DR PEPPER SNAPL (DPS): Free Stock Analysis Report
PHILIP MORRIS (PM): Free Stock Analysis Report
TYSON FOODS A (TSN): Free Stock Analysis Report
MONSTER BEVERAG (MNST): Free Stock Analysis Report
To read this article on Zacks.com click here.
