Keurig Dr Pepper (KDP) Last Update 6/10/24
Related: CMG KO MCD PEP
% of Stock Price
Revenue
Gross Profits
Free Cash Flow
Keurig Dr Pepper
STOCK PRICE
DIVISION
% of STOCK PRICE
International
17.0%
$8.04
Net Debt
20.1% $9.47
TOTAL
100%
$47.14
$37.67
Yours
Trefis Price
N/A
$34.06
Market
 
Top Drivers for Period
Key Drivers
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RECENT NEWS AND ANALYSIS

Potential upside & downside to trefis price

Keurig Dr Pepper Company

VALUATION HIGHLIGHTS

  1. Beverage Concentrates (U.S. Beverages, U.S. Coffee) constitute 83% of the Trefis price estimate for Keurig Dr Pepper's stock.
  2. International constitutes 17% of the Trefis price estimate for Keurig Dr Pepper's stock.

WHAT HAS CHANGED?


  1. KDP Stock Performance

    KDP stock has seen a 15% rise, moving from levels of $30 in early January 2021 to around $35 now (early June 2024), vs. an increase of about 45% for the S&P 500 over this roughly three-year period.

    However, the increase in KDP stock has been far from consistent. Returns for the stock were 15% in 2021, -3% in 2022, and -7% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 — indicating that KDP underperformed the S&P in 2021 and 2023.

  2. Q1'24 Earnings

    Net sales for Q1 2024 increased 3.4% to $3.5 billion. This was driven by a 4.3% growth in the U.S. Refreshment Beverages and an 11.8% rise in the International segment, partly offset by a 2.1% decline for the U.S. Coffee segment. The sales growth was led by 3.1% pricing gains, partially offset by a 0.3% fall in volume. The company reported earnings of $0.38 on a per-share and adjusted basis, compared to $0.34 in the prior-year quarter.

  3. 2021 Debt Refinancing

    On March 15, 2021, Keurig Dr Pepper issued a $2.2 billion aggregate principal amount of senior unsecured notes, consisting of $1.2 billion aggregate principal amount of 0.750% Senior Notes due 2024, $500 million aggregate principal amount of 2.250% Senior Notes due 2031 and $500 million aggregate principal amount of 3.350% Senior Notes due 2051.

  4. Dr Pepper Snapple's merger with Keurig

    JAB Holdings, Keurig's owner, has acquired a number of coffee brands, such as Jacobs, Peets, Caribou, and Keurig. It has also scooped up Krispy Kreme Doughnuts, Panera Bread, and Au Bon Pain, among other food and beverage companies. However, being able to deliver these products to places where the consumers shop requires a massive distribution network, and this is where Dr Pepper Snapple has helped. DPS has benefited from Keurig's e-commerce capabilities.

  5. Strong coffee growth expected

    The addressable market size of the hot beverage market is roughly $0.7 trillion. Moreover, this segment is growing at a fast pace – around 6% annually. This should benefit KDP, as Keurig Green Mountain has a strong coffee portfolio. The company has been able to drive its household penetration through its K-Cup pods.

BUSINESS SUMMARY

Keurig Dr Pepper is a leading coffee and beverage company in North America, with a diverse portfolio of flavored (non-cola) carbonated soft drinks (CSDs), non-carbonated beverages (NCBs), including ready-to-drink teas, juices, juice drinks, water and mixers, and specialty coffee, and is a leading producer of innovative single-serve brewing systems. Some of the company's most valuable brands are Keurig, Dr Pepper, Green Mountain Coffee Roasters, Canada Dry, Snapple, Bai, Mott's, and The Original Donut Shop.

Keurig Dr Pepper was formed as a result of the merger of Keurig Green Mountain and Dr Pepper Snapple, which was completed on July 9, 2018.

KEY TRENDS

Popularity of Ginger Ale

The increasing popularity of ginger ale has been driven by millennials as they look for more authentic, quality beverages having natural flavors. Ginger beverages have been gaining traction in many markets around the world, with demand growing strongly in the U.S., U.K., Spain, and Mexico. This segment is expected to continue its strong growth in the coming years.

Strong Coffee Growth Expected

The addressable market size of the hot beverage market is roughly $0.7 trillion. Moreover, this segment is growing at a fast pace – 6% annually. This should benefit KDP, as Keurig Green Mountain has a strong coffee portfolio. The company has been able to drive its household penetration through the launch of its coffeehouse brewers – K-Cup pods.

Deal With Evian

In 2018, KDP signed an agreement with Danone Waters of America (DWA) to sell, distribute, and merchandise Evian water. DWA is benefiting from KDP's massive distribution network in the U.S., covering roughly thousands of large and small format stores across the country. Evian is the leading premium water in a category that is growing in high-single-digits annually, which should benefit KDP.