Dr Pepper Snapple’s Stellar Performance and Raised Outlook in 3Q15
Dr Pepper Snapple (DPS) raised its sales and earnings outlook for fiscal 2015 following strong 3Q15 results. The company expects its core earnings per share (or EPS) to come in the $3.92–$3.98 range compared to the previous guidance range of $3.85–$3.93.
The company expects its net sales to grow by 2% compared to the previous outlook of net sales growth of just over 1%. The latest sales growth guidance is net of a foreign currency headwind of about 2%.
Fiscal 2015 outlook
Dr Pepper Snapple (DPS) expects its overall sales volume for fiscal 2015 to increase by 1 point compared to the prior year’s volume. The company expects its volume growth to come from its noncarbonated portfolio while it expects its carbonated soft drink volume to be flat. The company is focused on expanding its noncarbonated portfolio. In August 2015, Dr Pepper Snapple purchased an 11.7% stake in BA Sports Nutrition, which owns the BodyArmor sports drink line.
Dr Pepper Snapple is also working on improving its soda volumes through its marketing efforts. The company is focusing on the college football season through its partnership with ESPN and the College Football Playoffs. The company is rolling out custom football and playoff packaging and merchandising. Dr Pepper Snapple has also partnered with its largest retail and bottling customers to drive incremental retail activation.
The company’s partnership with Keurig Green Mountain (GMCR) is also a part of its strategy to boost its soda volumes. Under this partnership, some of Dr Pepper Snapple’s brands will be available on the Keurig Kold at-home carbonation system, which launched in September 2015.
Dr Pepper Snapple’s fiscal 2015 outlook update also indicated further deflation in packaging and ingredients costs, primarily from lower costs for PET (polyethylene terephthalate), aluminum, and apple juice concentrate. The company expects this deflation to reduce the total cost of goods sold by ~2% on a constant volume mix basis compared to the previous guidance of a 1.5% reduction
Dr Pepper Snapple’s strong performance in the first nine months of fiscal 2015 has impressed its investors. The company’s stock touched its all-time high of $90.81 on October 23, the day following the announcement of its 3Q15 results. Dr Pepper Snapple reported a 3% rise in its net sales, in contrast to PepsiCo (PEP) and Coca-Cola (KO), which reported a 5.2% and 4.6% decline in their 3Q15 revenues, respectively. Dr Pepper Snapple constitutes 0.3% of the holdings of the iShares Russell Mid-Cap ETF (IWR).
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