A Refreshing 1Q16: Time to Snap Up Dr Pepper Snapple Stock?
Sales surpass estimates
Dr Pepper Snapple (DPS) reported a 2.5% rise in its net sales for 1Q16, which ended March 31, 2016. The company’s 1Q16 net sales of $1.5 billion beat analysts’ sales expectations by two cents. Dr Pepper Snapple’s larger peers Coca-Cola (KO) and PepsiCo (PEP) reported declines of 4% and 2.9%, respectively, in their 1Q16 revenues, primarily due to currency headwinds.
Coca-Cola and PepsiCo have significant international operations, which expose them to currency fluctuations. International revenue of Coca-Cola and PepsiCo accounted for 54% and 44% of their fiscal 2015 revenues, respectively. Dr Pepper Snapple has less international exposure than Coca-Cola and PepsiCo, with international sales accounting for 11.3% of its net sales in 2015. Currency headwinds brought down Dr Pepper Snapple’s 1Q16 net sales by 2%. The iShares Russell Mid-Cap ETF (IWR) has a 0.3% exposure to Dr Pepper Snapple. International sales accounted for 21.3% of the fiscal 2015 net sales of Monster Beverage (MNST).
Sales growth drivers
The 2.5% growth in Dr Pepper Snapple’s net sales in 1Q16 was driven by:
- its favorable product and package mix, which had a 3% positive impact
- a 1% positive impact of higher pricing
- a 1% rise in the company’s sales volumes
In addition to currency headwinds, these favorable factors were partially offset by an unfavorable segment mix and higher discounts, which collectively decreased Dr Pepper Snapple’s net sales in 1Q16 by 1%. The unfavorable segment mix was a result of a higher proportion of concentrate sales to finished goods case sales. The company attributed the higher discounts in the first quarter to accrual timing in the company’s fountain foodservice business, which will reverse in the third quarter of 2016. We’ll discuss the company’s beverage volumes in the next part of this series.
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