GICS Sector : Consumer Defensive
Keurig Dr Pepper Inc.operates as a beverage company in the United States and internationally.It operates through Coffee Systems, Packaged Beverages, Beverage Concentrates, and Latin America Beverages segments.
Keurig Dr Pepper (KDP) reported a strong Q3 with net sales growth of 10.6%, driven by volume/mix and pricing actions. The company's EPS came out at $0.54, slightly beating estimates of $0.537. The revenue growth was driven by all three segments, with Refreshment Beverage net sales up 14.5%, U.S. Coffee net sales up 1.5%, and International net sales up 10%. The company's adjusted EPS growth is expected to be in the high single digits, driven by pricing, mix management, and productivity.
Publication Date: Oct -28
The company's financial performance has been strong, with net sales growing at a 6% CAGR and adjusted EPS at an 11% CAGR since 2018. KDP's U.S. Coffee business, led by Olivier Lemire, has driven $4.6 billion in net sales and $1.4 billion in adjusted EBITDA over the last 12 months. The Keurig system has 94% brand awareness and is the undisputed leader in single-serve coffee, with 47 million active households in North America.
KDP's acquisition of JDE Peet's is expected to create a global coffee powerhouse with $16 billion in net sales and over $3 billion in adjusted EBITDA. The combined entity will have a broad product line, diversified across formats and channels, and a strong financial profile. The company expects to drive top and bottom-line growth, leveraging the complementary nature of the two businesses, and capturing synergistic growth opportunities. The separation into two pure-play companies, Beverage Co. and Global Coffee Co., is expected to be completed by year-end 2026.
To understand what's priced in, we can look at KDP's valuation metrics. The company's P/E Ratio is 25.1, P/B Ratio is 1.57, and P/S Ratio is 2.45. The EV/EBITDA ratio is 17.06, indicating a relatively high valuation. However, the Dividend Yield is 3.15%, and the Free Cash Flow Yield is 4.0%, suggesting a reasonable return for investors. With a Net Debt / EBITDA ratio of 4.75, KDP's leverage is manageable, but investors should monitor the company's deleveraging plans.
KDP's growth prospects are driven by the global coffee category's attractiveness, with a 2% 40-year CAGR. The company believes coffee has an emotional, premiumization, comfort, and health element, making it a rare situation with a health tailwind. Analysts estimate next year's revenue growth at 4.2%, which is relatively modest. However, KDP's long-term algorithm targets low single-digit top-line growth and high single-digit EPS growth, inclusive of synergies.
Groupe la Francaise Acquires New Stake in Keurig Dr Pepper, Inc $KDP
Dec -04
3 Interesting Buys Bill Nygren Made Last Quarter
Dec -02
Treat Yourself to a Crazy Good Coffee - The Original Donut Shop® and Pop-Tarts® Announce New Flavor Innovation Ahead of 2025 Pop-Tarts Bowl
Dec -01
Advisors Asset Management Inc. Boosts Stock Position in Keurig Dr Pepper, Inc $KDP
Dec -01
Keurig Dr Pepper, Inc (NASDAQ:KDP) Given Consensus Recommendation of “Hold” by Brokerages
Dec -01
Bill Nygren's Strategic Moves: Centene Corp Exits with a -2.14% Impact
Nov -25
Keurig Dr Pepper Appoints Anthony DiSilvestro as Chief Financial Officer
Nov -25
Keurig® Transforms the At-Home Coffee Experience with the Debut of Keurig Coffee Collective - Its First Ever Branded Coffee Line
Nov -24
The U.S. Refreshment Beverages segment growth of 4.2% for Keurig Dr Pepper Inc. is driven by increased consumer demand for convenient and sustainable beverage options, strong performance of flagship brands such as Dr Pepper and Canada Dry, and successful product innovations and packaging redesigns that appeal to health-conscious consumers.
Keurig Dr Pepper Inc.'s international segment growth of 5.1% is driven by increased demand for beverage products, expansion into new markets, and strategic partnerships. The company's diversified portfolio, including brands like Keurig and Dr Pepper, contributes to its growth momentum. Additionally, investments in e-commerce and digital marketing enhance its global reach and consumer engagement.
The U.S. Coffee segment from Keurig Dr Pepper Inc. is driven by growth in single-serve coffee sales, increased consumer demand for convenience and sustainability, and expansion of the Keurig brand through innovative products and partnerships, resulting in a 3.5% growth rate.
Single-serve coffee makers and brewers that use K-Cup pods to provide a convenient and customizable coffee experience
Hot and iced tea, hot chocolate, and other specialty beverages available in K-Cup pods
At-home water filtration systems that provide clean and fresh-tasting water
A variety of flavored sodas, juices, and sparkling waters from brands like Dr Pepper, 7 Up, and Snapple
Flavor shots and creamers that can be used to customize coffee and other beverages
Commercial coffee makers and brewers designed for high-volume use in offices and workplaces
Keurig Dr Pepper Inc. faces moderate threat from substitutes, as consumers have various options for coffee and beverage products. However, the company's strong brand portfolio and innovative products help mitigate this threat.
Keurig Dr Pepper Inc. has a large and diverse customer base, which reduces the bargaining power of individual customers. Additionally, the company's products are widely available, making it difficult for customers to negotiate prices.
Keurig Dr Pepper Inc. relies on a few large suppliers for its coffee beans and other raw materials. While the company has some bargaining power due to its size, suppliers may still exert some pressure on prices and supply terms.
The beverage industry has high barriers to entry, including significant capital requirements and established distribution networks. This makes it difficult for new entrants to compete with Keurig Dr Pepper Inc.'s scale and brand recognition.
The beverage industry is highly competitive, with many established players competing for market share. Keurig Dr Pepper Inc. faces intense rivalry from companies like PepsiCo, The Coca-Cola Company, and Nestle, which can lead to pricing pressure and advertising wars.
| Value | |
|---|---|
| Debt Weight | 36.60% |
| Debt Cost | 4.23% |
| Equity Weight | 63.40% |
| Equity Cost | 7.02% |
| WACC | 6.00% |
| Leverage | 57.73% |
Value: 6.8
Growth: 5.8
Quality: 7.5
Yield: 10.0
Momentum: 8.5
Volatility: 9.7
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Value: 8.7
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Growth: 7.2
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Value: 1.8
Growth: 3.4
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Yield: 6.0
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Value: 2.6
Growth: 4.7
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Value: 3.8
Growth: 3.0
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Yield: 5.0
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Volatility: 8.3
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