Keurig Dr Pepper Inc. (NASDAQ: KDP) is a leading beverage company in North America, with a diverse portfolio of more than 125 brands of coffee, tea, soda, juice, water, and other drinks. The company has been making headlines recently with some notable developments and news that have boosted its stock performance and growth potential. For example, it launched its new Drinkworks Home Bar system, allowing consumers to make cocktails, beers, ciders, and wines at home with the touch of a button. It also acquired Core Nutrition LLC, a premium bottled water and enhanced beverage company that owns the Core Hydration and Core Organic brands. It announced its partnership with McDonald's, which will make McCafé coffee available in K-Cup pods for Keurig brewers in the US. It released its second-quarter 2023 earnings report, which showed a revenue increase of 11.1% year-over-year, an adjusted earnings per share growth of 13.8%, and a free cash flow improvement of 46.4%.
Keurig Dr Pepper Inc's Overview
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Keurig Dr Pepper Inc (KDP) got formed in 2018 by the merger of Keurig Green Mountain and Dr Pepper Snapple Group. The company has its headquarters in Burlington, Massachusetts, and Frisco, Texas. KDP operates in four segments: Coffee Systems, Packaged Beverages, Beverage Concentrates, and Latin America Beverages. The company produces and distributes a variety of hot and cold drinks, such as coffee, tea, soda, juice, water, and other beverages. Some of its well-known brands include Keurig, Dr Pepper, Snapple, Green Mountain Coffee Roasters, Canada Dry, 7UP, A&W, and Bai.
The current CEO of KDP is Robert Gamgort, who has been leading the company since 2016. He has over 30 years of experience in the consumer packaged goods industry and has held senior positions at Mars, Pinnacle Foods, and Kraft Foods. The largest shareholders of KDP are JAB Holding Company, which owns 33.3% of the company's shares, and Mondelez International, which owns 5.3%. Also, JAB Holding Company is a private investment firm with stakes in other beverage and food companies, such as Starbucks, Panera Bread, and Krispy Kreme. Mondelez International is a global snack company that owns brands such as Oreo, Cadbury, and Trident.
Some of the key milestones in KDP's history are:
- In 1981, Green Mountain Coffee Roasters got founded as a small coffee shop in Vermont.
- In 1992, Keurig was also founded as a company that aimed to create a single-serve coffee system for offices.
- In 2006, Green Mountain Coffee Roasters acquired Keurig and became one of the leading players in the single-serve coffee market.
- In 2008, Dr Pepper Snapple Group got spun off from Cadbury Schweppes as an independent beverage company with a portfolio of over 50 brands.
- In 2018, Keurig Green Mountain and Dr Pepper Snapple Group merged to create Keurig Dr Pepper, a beverage giant with over 125 brands and annual revenues of over $11 billion.
- In 2020, the company achieved its goal of making 100% of its K-Cup pods from recyclable plastic, as well as responsibly sourcing 100% of its coffee.
- In 2021, Kuerig announced new commitments in health and well-being, diversity and inclusion, and environmental stewardship, as part of its Drink Well. Do Good. corporate responsibility strategy.
- The company reported a 10.83% increase in annual revenue, driven by strong growth in its coffee systems, packaged beverages, and Latin America beverages segments
Keurig Dr Pepper Inc's Business Model and Products/Services
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Keurig Dr Pepper (KDP) makes money from selling beverages, licensing and royalties, partnerships and distribution, sales of the Keurig system, and advertising and sponsorships. The company offers a wide range of beverages, such as carbonated soft drinks, juices, teas, coffees, and bottled water, through various channels, including retail stores, e-commerce platforms, and foodservice outlets. The company also allows other beverage makers and distributors to use its brands and trademarks. It collaborates with various companies to expand its market reach through joint marketing, co-branded products, and exclusive distribution rights. Moreover, the company sells its innovative single-serve coffee system, the Keurig, and related accessories, which enable consumers to brew a variety of hot and cold beverages at home or in the office. Furthermore, the company invests in marketing campaigns across various media channels to promote its brands and products and drive consumer engagement.
Main Products and Services
Some of the leading products in the Keurig Dr Pepper product list to cater to different consumer preferences and needs are Keurig, a single-serve coffee system that uses K-Cup pods to brew various beverages; Dr Pepper, a carbonated soft drink with a unique blend of 23 flavors; Snapple, a brand of natural teas and juices; Green Mountain Coffee, a brand of specialty coffees made from high-quality beans; and 7UP, a lemon-lime flavored carbonated soft drink.
Keurig Dr Pepper Inc.'s Financials, Growth, and Valuation Metrics
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Keurig Dr Pepper (KDP) reported strong financial results for the second quarter of 2023. The company had a market capitalization of about $54.4 billion, and its net income increased 130.7% to $503 million. Its net sales increased 6.6% to $3.79 billion, driven by favorable net price realization and resilient volume/mix performance across all segments. However, its operating margin and net margin decreased 1.9 and 0.5 percentage points, respectively, due to higher input costs and operating expenses, as well as the comparison to year-ago benefits related to the Company's strategic asset investment program, a change in accounting for non-cash stock compensation expense and a recovery of legal fees. Its return on equity also decreased 0.8 percentage points to 11.5%.
The company's balance sheet strength and implications showed that its net cash provided by operating activities decreased 7% to $425 million, and its free cash flow decreased 5% to $295 million. Its total debt increased from $14.9 billion to $15 billion, and its net debt to Adjusted EBITDA ratio improved from 4.0x to 3.9x.
Key Financial Ratios and Metrics
KDP's valuation multiples can get compared to its peers and the industry to determine if the stock is undervalued, fairly valued, or overvalued. The company's trailing twelve months (TTM) P/E ratio was 28.6x, which was higher than its peers and the industry average, indicating that the stock may be overvalued based on its earnings performance. However, its TTM P/S ratio was 4.0x, and its P/B ratio was 1.9x, which were lower than its peers and the industry average, indicating that the stock may be undervalued based on its sales performance and book value. Its TTM EV/EBITDA ratio was 16.6x, which was slightly lower than the industry average but higher than some of its peers, indicating that the stock may be fairly valued based on its operating performance.
KDP Stock Performance Analysis
Keurig Dr Pepper Inc. (KDP) went public on September 21, 1993. The company trades on the NASDAQ stock exchange under the ticker symbol KDP. The company is in the United States, denominating its stock in US dollars (USD). The stock's trading hours are from 9:30 a.m. to 4:00 p.m. Eastern Time (ET) on weekdays, excluding US market holidays. The stock also trades in the pre-market and after-market sessions, which are from 4:00 a.m. to 9:30 a.m. ET and from 4:00 p.m. to 8:00 p.m. ET, respectively.
KDP Stock Dividend
KDP has not performed any stock splits since its IPO. However, the company has paid regular quarterly dividends to its shareholders since 2018. The company's current annual dividend rate is $0.80 per share, which translates to a dividend yield of 2.37% as of August 18, 2023.
KDP Stock Price Performance since its IPO
Source: TradingView
KDP stock price has fluctuated significantly since its IPO, reaching historical highs and lows at different times. The stock's all-time high was $40.27 on February 16, 2021, while its all-time low was $5.50 on October 10, 2008. The stock's current price as of August 18, 2023, was $33.75, which represents a decrease of 16.17% from its all-time high and an increase of 513.64% from its all-time low.
KDP's stock price volatility and trends have also varied over time, depending on factors such as market conditions, earnings reports, industry news, and competitive dynamics. The stock's beta, which measures its sensitivity to market movements, is currently 0.57, indicating that the stock is less volatile than the market average. The stock's 52-week range, which shows the difference between its highest and lowest prices in the past year, is $30.47 - $40.27, indicating that the stock has experienced a moderate level of price variation in the past year.
Some of the key drivers of KDP stock price are:
- The company's revenue growth, profitability margins, cash flows, debt levels, and return on equity influence its financial performance and growth prospects.
- The company's valuation multiples reflect how the market perceives its value relative to its earnings, sales, book value, and operating performance.
- The company's competitive position and market share in the beverage industry, which get affected by its product portfolio, brand recognition, customer loyalty, innovation capabilities, distribution network, and strategic partnerships.
- The company's dividend policy and payout ratio indicate how much of its earnings it distributes to its shareholders as dividends.
- The company's stock analyst ratings and price targets provide opinions and expectations from professional analysts who cover the company's stock.
KDP Stock Forecast
Source: TradingView
By analyzing KDP's key resistance, support levels, consensus analyst recommendations, and price targets, the forecast of KDP's stock can get derived.
Key Resistance and Support Levels
Keurig Dr Pepper stock has been trading in a wide range of 30.47 - 32.79 in the last month and has an average volume of 9311110 traded shares per day, which is a good sign of liquidity. The short-term trend of KDP is positive, while the long-term trend is still negative. The support zone ranges from 30.76 to 31.74, while the resistance zones range from 32.59 to 33.09, 35.29 to 35.34, 36.26 to 36.29, and 39.28. KDP is trading in the lower part of its 52-week range, which is not a good signal.
Is KDP Stock a Buy, Sell, or Hold?
The consensus analyst rating for Keurig Dr Pepper stock is Moderate Buy, based on the current 1 sell rating, 3 hold ratings, and 6 buy ratings. The average twelve-month price target for KDP stock is $37.10, with a high price target of $42.00 and a low price target of $30.00. This implies an upside of 9.86% from its current price of $33.77. However, some analysts have a more bearish outlook for KDP stock, citing its high valuation, low earnings growth, and competitive pressures. Therefore, investors should be cautious and do their research before buying or selling KDP stock.
Challenges and Opportunities
Keurig Dr Pepper (KDP) faces various challenges and opportunities in the beverage industry, affecting its performance and growth prospects. Some of the key factors are:
Competitive Risks
Keurig Dr Pepper Inc (KDP) faces strong competition from other beverage giants like Coca-Cola, PepsiCo, Nestlé, and Starbucks, as well as from emerging players and private labels. These competitors have larger market shares, resources, and brand recognition than KDP. They also pose threats to KDP's pricing power, distribution channels, and customer loyalty. For example, Coca-Cola and PepsiCo have also launched their coffee products to compete with KDP's Keurig brewing systems and K-Cups. KDP's competitive advantages include its diversified portfolio of leading brands in various segments, its innovative product development and marketing strategies, its strong partnerships with retailers and distributors, and its efficient supply chain and operational excellence.
Other Risks
KDP also faces other risks, such as regulatory changes, consumer preferences, environmental issues, supply chain disruptions, and litigation. Regulatory changes may affect KDP's ability to operate in specific markets, comply with health and safety standards, or use certain ingredients or packaging materials. Consumer preferences may shift away from KDP's products due to health concerns, social trends, or changing tastes. Environmental issues may impact KDP's sourcing of raw materials, production processes, or waste management. Supply chain disruptions may result from natural disasters, pandemics, labor disputes, or geopolitical conflicts. Litigation may arise from product liability claims, intellectual property disputes, or antitrust investigations.
Growth Opportunities
KDP has launched new products such as Dr Pepper Zero Sugar, Snapple Lemonade Tea, and Keurig K-Supreme Plus SMART brewer to cater to the changing consumer demands and preferences. These products offer new features, flavors, or benefits that appeal to different segments of customers. KDP has also entered new markets such as China, India, and Brazil through partnerships, acquisitions, and joint ventures to expand its global presence and reach new customers. These markets have large populations, growing economies, and increasing beverage demand. KDP has also entered new categories, such as energy drinks, sports drinks, and sparkling water, to diversify its portfolio and tap into the growing segments. These categories offer higher margins, faster growth rates, and more innovation potential than traditional categories.
Future Outlook and Expansion
KDP has a positive outlook for the future, expecting to deliver substantial revenue and earnings growth, margin expansion, cash flow generation, and shareholder value creation. KDP plans to invest in its brands, innovation, distribution, and digital capabilities to drive organic growth and gain market share. KDP also aims to leverage its scale, synergies, and operational efficiency to improve its profitability and cash conversion. KDP also intends to pursue strategic acquisitions or partnerships that can enhance its portfolio or geographic footprint. KDP also commits to improving its environmental performance by achieving net positive water impact by 2050.
Trading Strategies for KDP Stock
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Keurig Dr Pepper stock can get traded in different ways, depending on the trader's goals, risk appetite, and time horizon. They include:
CFD Trading
CFD trading is an agreement to exchange the difference in the value of an asset between the opening and closing of the trade. CFD trading allows traders to trade on both rising and falling markets, access a wide range of markets, trade with leverage, and avoid some costs and taxes. However, CFD trading also involves risks such as losing more than the initial deposit, facing additional charges, not getting the exact market price, and not being able to close the position at the desired time or price.
Swing Trading
Another way is swing trading, which is holding positions for a few days to a few weeks, depending on the market trends and signals. Swing trading enables traders to capture more significant price movements, reduce trading frequency, and use technical analysis and indicators. However, swing trading also entails risks such as needing a larger capital, facing overnight risks, and needing to monitor multiple markets and instruments.
Dividend Investing
A third way is dividend investing, which is buying stocks that pay regular dividends and reinvesting them to compound the returns. Dividend investing allows investors to generate passive income, benefit from the power of compounding, and invest in stable and established companies. However, dividend investing carries risks such as missing out on capital appreciation, facing dividend cuts or suspensions, and paying taxes on dividend income.
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Conclusion
KDP has a diversified portfolio of brands, products, and segments. KDP has strong financial performance, growth potential, and valuation metrics while facing some challenges and opportunities in the competitive and dynamic beverage industry. There are various ways to trade KDP stock, such as CFD trading, swing trading, and dividend investing, each with its advantages and risks that traders should be aware of. One of the brokers that offers CFD trading on KDP stock is VSTAR, with numerous benefits and features for traders. Trading KDP stock can be a rewarding experience if done with proper analysis, strategy, and risk management.
