Keurig Dr Pepper (KDP) Banks On Brand Strength Amid Inflation

·3 min read

Keurig Dr Pepper KDP gained from continued brand strength, significant pricing, solid performance in its cold beverages and strong market share gains. This led to the solid fourth-quarter 2022 results, wherein the top line surpassed the Zacks Consensus Estimate and grew year over year

Net sales of $3,803 million jumped 12.1% from the year-ago quarter and 12.4% on a constant-currency basis (cc). The upside was driven by double-digit growth across all four segments. Adjusted earnings of 50 cents per share grew 11.1% year over.

Driven by the robust quarterly results, management issued its view for 2023, which seems encouraging. The company expects sales growth of 5% and adjusted earnings increase of 6-7%.

This Zacks Rank #3 (Hold) company has also been witnessing continued momentum in the Packaged Beverages segment for a long time now. The segment reported sales growth of 9.9% in the fourth quarter, gaining from higher net price realization of 14.9%, somewhat offset by a year-over-year volume/mix decline of 4.8%. The segment benefited from growth in CSDs, Mott's, Snapple, Hawaiian Punch, Evian and Polar seltzers.

Its retail dollar consumption grew 12.2%, with market share expansion above 92% of KDP's cold beverage portfolio. This mainly reflected strength in CSDs, premium unflavored water, seltzers, teas, apple juice and fruit drinks. Also, strength in CORE Hydration, Evian, Polar seltzers, Mott's, Hawaiian Punch and Dr Pepper, Crush, Canada Dry, A&W, Schweppes and Squirt CSDs aided the results.

In coffee, the retail dollar consumption of single-serve pods manufactured by Keurig Dr Pepper rose 7.1% in channels tracked by Iri, driven by higher pricing in partner and KDP-owned and licensed brands. Also, KDP’s manufactured share was solid at 83%, driven by the strength of owned and licensed pods.

However, Keurig Dr Pepper has been reeling under significant input cost inflation, rising transportation costs and supply-chain disruptions, which are likely to persist in the near term. These, along with the adverse impacts of higher marketing investment, acted as deterrents. Going ahead, management expects inflation to remain the greatest challenge.


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Although shares of the company have lost 0.7% in the past three months compared with the industry’s decline of 1.4%, the above-mentioned upsides are likely to help get KDP back on track in the near term.

Other Consumer Staple Stocks Worth a Look

Some better-ranked food stocks are Post Holdings POST, General Mills GIS and Vital Farms VITL.

Post Holdings, which operates as a consumer-packaged goods company, currently sports a Zacks Rank #1 (Strong Buy). POST has a trailing four-quarter earnings surprise of 34.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Post Holdings’ current fiscal-year EPS suggests an increase of 111.3% from the year-ago reported number.

General Mills, a branded consumer foods company, currently carries a Zacks Rank #2 (Buy). GIS has a trailing four-quarter earnings surprise of 8.7%, on average.

The Zacks Consensus Estimate for General Mills’ current fiscal-year sales and earnings suggests growth of 5% and 6.1%, respectively, from the year-ago reported figures.

Vital Farms, which provides pasture-raised products, currently carries a Zacks Rank #2. VITL has a trailing four-quarter earnings surprise of 53.3%, on average.

The Zacks Consensus Estimate for Vital Farms’ current fiscal-year sales suggests an increase of 25.4% from the year-ago reported number.

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