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Why Dr Pepper Snapple Group Inc. (DPS) Shares Are Down Today

Karl Utermohlen

Dr Pepper Snapple Group Inc. (NYSE:DPS) shares declined Thursday as the company lowered its profit forecast for the current fiscal year.

Dr Pepper Snapple Group Inc. (DPS)

The maker of various sodas and other soft drinks revealed that its full-year expectations will be lower than previously expected due to an unforeseen charge surrounding one of its suppliers.

A default by a company supplying resin to its Mexican operations will hurt Dr Pepper Snapple Group’s business due to the Sept. 19 earthquake in Mexico. Operations were also negatively affected by hurricanes hitting certain parts of the U.S. and Caribbean.

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It is unclear how much the company’s business has been affected by these natural disasters. The company has enough supplies to reach its resin needs, but certain prepaid resin inventory will have to be written off due to the default, which took place at the supplier’s resin plant.

Dr Pepper Snapple Group said Wednesday that the write-off will hit the current quarter’s operating income by $7 million to $9 million, while earnings will be hit by three cents per share.

Third-quarter earnings are slated to be around $1.19 per share, according to data compiled by Thomson Reuters. Dr Pepper Snapple Group reduced its 2017 earnings guidance to be in the range of $4.53 to $4.63 per share, compared to its July estimate of $4.56 to $4.66 per share.

This is one of the harshest hurricane seasons that the Americas has suffered in a long time.

DPS shares fell 2.1% Thursday.

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