Why Dr Pepper Snapple Should End Fiscal 2015 on a Positive Note
Dr Pepper Snapple (DPS) is expected to announce its fourth quarter and full-year 2015 results on February 17. In the first nine months of fiscal 2015, the third-largest soda maker in the United States performed better than beverage giants Coca-Cola (KO) and PepsiCo (PEP) in terms of sales growth.
Dr Pepper Snapple’s lower exposure to international operations compared to Coca-Cola and PepsiCo is working in its favor as the dollar continues to strengthen against major world currencies. Dr Pepper Snapple has a presence in the United States, Canada, Mexico, and the Caribbean. Coca-Cola and PepsiCo sell their beverages in over 200 countries.
Recap of 3Q15 performance
Dr Pepper Snapple’s sales grew 3% in 3Q15, which ended on September 30, 2015, driven by a 3% rise in concentrate case sales, favorable product and package mix, and higher pricing. Soda makers have been increasing the prices of their products and also promoting smaller packages in an attempt to offset the impact of subdued soda beverage volumes. The headwinds that impacted Dr Pepper Snapple’s third quarter sales included $39 million in unfavorable foreign currency translation and higher discounts primarily associated with the fountain business. The company recorded volume growth of 1% in the United States and Canada and 8% in Mexico and the Caribbean.
Dr Pepper Snapple is 0.3% of the iShares Russell Mid-Cap ETF (IWR) and 0.1% of the SPDR S&P 500 ETF (SPY).
Coca-Cola and PepsiCo reported 4.6% and 5.2% declines in their sales in 3Q15 due to currency headwinds. Monster Beverage (MNST) reported 19% growth in its 3Q15 sales, driven by strong demand for energy drinks.
4Q15 and fiscal 2015 expectations
The consensus Wall Street analysts’ estimate of Dr Pepper Snapple’s sales in 4Q15 is $1.53 billion. This estimate reflects a 1.4% rise compared to 4Q14 net sales. Analysts expect the full-year fiscal 2015 revenue to come in at $6.26 billion, reflecting 2.3% growth compared to the previous year.
Based on the guidance issued in October 2015, Dr Pepper Snapple expects its fiscal 2015 net sales to grow 2% on a year-over-year basis. The company expects currency headwinds to have a 2% impact on its net sales growth.
In this preview series on Dr Pepper Snapple’s 4Q15 results, we’ll discuss the company’s earnings expectations, margin expansion, stock price movement, and valuation. The next part of this series discusses the performance of the company’s still beverages.
Browse this series on Market Realist: