Keurig Dr Pepper Inc.’s KDP robust business strategies poise it well for growth. The company has been gaining from brand strength and pricing actions. KDP’s expansion initiatives and efforts to innovate its products are acting as tailwinds.
Let us delve deeper.
KDP’s Strategies Seem Encouraging
Keurig Dr Pepper has been making substantial strides with its strategy to reshape its portfolio through its recent announcement to acquire a 60% stake in GHOST Lifestyle LLC, with an option to purchase the remaining 40% by 2028. GHOST Lifestyle is known for its rapidly growing GHOST Energy drinks. This reshaping approach focuses on prioritizing high-growth partnerships, with the Electrolit and La Colombe collaborations as significant examples.
Continued strength in the Refreshment Beverages segment for a while has been aiding KDP’s overall performance. Robust sales and a favorable mix of products, helped by the completion of the transition of Electrolit, have been bolstering the segment’s performance. The continuation of this trend will aid the top line in the future.
Keurig Dr Pepper’s consumer-focused innovation model, household penetration and loyalty have been driving its market share across key categories like liquid refreshment beverages, K-Cup pods and brewers in all major markets across the United States, Mexico and Canada.
The company’s growth reflects a strategic mix of innovation, brand activity and strong commercial execution, bolstered by its ongoing focus on cost efficiency, productivity and disciplined capital management. Strength in its brand portfolio and in-market execution, along with elasticity across most categories, has been aiding KDP’s revenues.
KDP Stock Price Performance
Although the KDP stock has lost 0.8% in the past month, it has fared better than the industry’s 2.9% decline.
Image Source: Zacks Investment Research
KDP Stock’s Valuation
KDP stock is trading at an appealing valuation relative to the industry. Going by the price/earnings ratio, the stock is currently trading at 15.81 on a forward 12-month basis, lower than 19.47 for the industry. Also, the stock is trading lower than its median of 16.63.
Image Source: Zacks Investment Research
Hindrance to KDP’s Growth Path
Keurig Dr Pepper is reeling under persistent cost pressures in transportation, warehousing and labor. These, along with the adverse impacts of higher marketing investment, have been acting as deterrents.
The company is also witnessing sluggishness in the coffee segment. In third-quarter 2024, sales in the U.S. Coffee segment dropped 3.6% year over year, reflecting a net price drop of 6.3%. Similar to the year-to-date trends, management assumes muted at-home coffee category trends for 2024.
Conclusion
Analysts seem quite optimistic about this energy drinks and alternative beverages marketer. The Zacks Consensus Estimate for 2025 sales and earnings per share (EPS) is pegged at $16.28 billion and $2.05, respectively, indicating year-over-year growth of 6.2% and 6.5%. KDP currently carries a Zacks Rank #3 (Hold).
Better-Ranked Consumer Staples Stocks to Consider
Freshpet, Inc. FRPT, a pet food company, has a trailing four-quarter average earnings surprise of 144.5%. FRPT currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Freshpet’s current financial-year sales and EPS indicates growth of 27.2% and 228.6%, respectively, from the prior-year levels.
Vital Farms VITL, which provides pasture-raised products, presently has a Zacks Rank of 2 (Buy). The consensus estimate for Vital Farms’ current financial-year sales and EPS indicates growth of 27.2% and 88.1%, respectively, from the prior-year levels.
VITL has a trailing four-quarter average earnings surprise of 48.5%.
McCormick & Company MKC, manufacturer and distributor of spices, seasonings, specialty foods and flavors, currently carries a Zacks Rank #2. MKC has a trailing four-quarter average earnings surprise of 13.8%.
The Zacks Consensus Estimate for MKC’s current financial-year sales and EPS indicates growth of 0.5% and 8.2%, respectively, from the year-ago reported figures.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
