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Keurig Dr Pepper Surges on Strong 1st-Quarter Earnings

Shares of Keurig Dr Pepper Inc. (NYSE:KDP) surged in post-market trading on Monday on the back of strong first-quarter earnings amid the Covid-19 outbreak.

The Burlington, Massachusetts and Plano, Texas-based beverage company reported net revenues of $2.61 billion for the quarter ending March 31, compared with net revenues of $2.5 billion in the prior-year quarter. Adjusted net earnings of 29 cents per share smashed the consensus estimate of 27 cents per share and outperformed the prior-year quarter's adjusted earnings of 25 cents per share.


Company accelerates growth in packaged beverages

Keurig Dr Pepper Chairman and CEO Bob Gamgort said that the company delivered first-quarter performance "in line with [management's] long-term targets," building on the business strength of the beverage giant's merger in mid-2018. Constant-currency net sales advanced 4.5%, driven by strong volume mix growth in packaged beverages.

Revenues in the Packaged Beverages business soared 9.1% year over year, reflecting an 8.7% increase in volume mix as consumers stock up beverages like Evian, Motts, Canada Dry, A&W and 7Up late during the quarter ahead of Covid-19 lockdown orders.

The strong growth in Packaged Beverages helped offset revenue decelerations in Beverage Concentrates and Coffee Systems, two businesses negatively impacted due to the shelter-in-place orders. Despite this, GuruFocus ranks Keurig Dr Pepper's profitability 7 out of 10 on the back of operating margins outperforming 89.25% of global competitors and a Joel Greenblatt (Trades, Portfolio) return on capital that outperforms 93.68% of global nonalcoholic beverage companies, which include The Coca-Cola Co. (NYSE:KO), a major holding of Warren Buffett (Trades, Portfolio)'s Berkshire Hathaway Inc. (NYSE:BRK.A)(NYSE:BRK.B), and PepsiCo Inc. (NASDAQ:PEP).


Shares soar on upbeat guidance

Shares of Keurig Dr Pepper soared over 7% in aftermarket trading as management reaffirmed its full-year 2020 guidance, including 13% to 15% growth in adjusted diluted earnings per share growth given the company's aggressive cost management, productivity programs and merger synergies. The company also targets a management leverage ratio between 3.5 and 3.8 at year-end and below 3.0 in approximately two to three years following the July 2018 merger.


Gurus with large holdings in Keurig Dr Pepper include George Soros (Trades, Portfolio)' Soros Fund Management, Jim Simons (Trades, Portfolio)' Renaissance Technologies and Mario Gabelli (Trades, Portfolio)'s GAMCO Investors Inc. (NYSE:GBL).


Disclosure: No positions.

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This article first appeared on GuruFocus.