Keurig Dr Pepper Inc (NYSE: KDP) is poised to generate sector leading mid-teens EPS growth through 2021, backed by merger synergies, according to BMO Capital Markets.
BMO’s Amit Sharma maintained an Outperform rating on Keurig Dr Pepper with a price target of $34.
Market sentiment for Keurig Dr Pepper’s legacy Ready to Drink (RTD) beverage portfolio continues to be “unnecessarily weak,” with investors focusing on coffee, Sharma said in the note.
He added that the company’s RTD business had “ingrained structural advantages” and was much larger than its other segments.
Consensus estimates of 4.5% EBIT growth through 2021 implies only a 150 basis point improvement from the average growth generated by the company from 2016 through 2018, which “artificially depresses KDP's post-synergies earnings growth potential and wrongly weighs down on its valuation multiple,” Sharma wrote.
The analyst expects Keurig Dr Pepper’s beverage segments to achieve stronger EBIT growth, as Dr Pepper remains well-positioned primed to benefit from a favorable pricing and competitive environment and the non-carbonate brands are performing well.
He added that although allied brands contribute less than 6%of total sales, they should boost the company’s top-line.
Shares of Keurig Dr Pepper were trading down 0.78% at $26.83 at the time of publishing on Wednesday.
:Keurig Dr Pepper Reports Mixed Q2 Earnings, Reaffirms Guidance
Q2 Earnings Preview For Keurig Dr Pepper
Latest Ratings for KDP
|Jul 2019||Initiates Coverage On||Neutral|
|Jun 2019||Upgrades||Market Perform||Outperform|
View More Analyst Ratings for KDP
View the Latest Analyst Ratings
See more from Benzinga
- DA Davidson Upgrades Carter's On End-Of-2019 Prospects
- Bank Of America Upgrades Scotts Miracle-Gro, High On Cannabis Prospects
- Wells Fargo Upgrades VMware, Defying Bearish Market Sentiment
© 2019 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.