Keurig Dr Pepper (NYSE: KDP) is scheduled to report its Q2 2022 results on Thursday, July 28. We expect the company to report revenue and earnings per the consensus estimates. The company’s coffee systems business will likely continue to face headwinds amid production shortfalls. However, the packaged beverages business should see steady growth led by market share gains. Rising costs will probably weigh on the company’s operating margins in Q2. That said, our forecast indicates that KDP stock has some more room for growth, as discussed below. Our interactive dashboard analysis of Keurig Dr Pepper Earnings Preview has additional details.
(1) Revenues expected to align with the consensus estimates
- Trefis estimates Keurig Dr Pepper’s Q2 2022 revenues to be around $3.4 billion, reflecting an 8% y-o-y growth and in line with the consensus estimate.
- The company reported a 5.2% decline in its Coffee Systems volume in Q1 2022 due to capacity constraints, and this trend likely extended to Q2 as well.
- However, all other segments – including packaged beverages – should see sales growth led by market share gains. Both volume and pricing are expected to see a rise in Q2.
- Looking at Q1 2022, Keurig Dr Pepper’s sales of $3.1 billion reflected a 6% y-o-y growth, driven by a 13% rise in packaged beverages sales.
- Our dashboard on Keurig Dr Pepper Revenues has more details on the company’s segments.
(2) EPS is likely to be in line with the consensus estimates
- Keurig Dr Pepper’s Q2 2022 adjusted earnings per share (EPS) is expected to be $0.39 per Trefis analysis, aligning with the consensus estimate.
- The company’s adjusted net income of $474 million in Q1 2022 reflected an under 1% rise from its $471 million figure in the prior-year quarter, as a 6% sales growth was offset mainly by about 170 bps operating margins contraction.
- For the full-year 2022, we expect the adjusted EPS to be higher at $1.70 than the EPS of $1.60 in 2021, with better sales growth and operating margin expansion in the second half.
(3) KDP stock looks like it has more room for growth
- We estimate Keurig Dr Pepper’s Valuation to be around $43 per share, 17% above the current market price of $36.
- At its current levels, Keurig Dr Pepper stock is trading at 21x forward earnings, in line with the last three-year average.
- However, we expect the multiple to expand given continued market share gains for some of the company’s brands.
- Note: P/E Multiples are based on Share Price at the end of the year and reported (or expected) Adjusted Earnings for the full year
While KDP stock has more room for growth, it is helpful to see how Keurig Dr Pepper Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.
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Furthermore, the Covid-19 crisis has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised how counter-intuitive the stock valuation is for PepsiCo vs. NVR.
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