Better Pricing To Bolster Keurig Dr Pepper’s Q1

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KDP: Keurig Dr Pepper logo
KDP
Keurig Dr Pepper

Keurig Dr Pepper stock (NYSE: KDP) will report its Q1 2023 results on Thursday, April 27. We expect KDP stock to trend higher, with Q1 revenues and earnings expected to exceed the consensus estimates. Better price realization will likely drive sales growth for the company. However, our forecast indicates that KDP stock has little room for growth, as discussed below. Our interactive dashboard analysis of Keurig Dr Pepper Earnings Preview has additional details.

(1) Revenues expected to be slightly above the consensus estimates

  • Trefis estimates Keurig Dr Pepper’s Q1 2023 revenues to be around $3.34 billion, reflecting a high single-digit y-o-y growth and marginally above the consensus estimate of $3.30 billion.
  • The sales growth will likely be driven by better price realization, while volume growth may remain tepid.
  • Looking at Q4 2022, Keurig Dr Pepper’s sales of $3.80 billion reflected a 12% y-o-y growth, driven by double-digit gains across its segments.
  • The sales growth was driven by a 13.1% favorable net price realization, marginally offset by a 0.7% decline in volume/mix.
  • Our dashboard on Keurig Dr Pepper Revenues has more details on the company’s segments.

(2) EPS likely to be marginally above the consensus estimates

  • Keurig Dr Pepper’s Q1 2023 adjusted earnings per share (EPS) is expected to be $0.34 per Trefis analysis, marginally above the $0.33 consensus estimate.
  • The company’s adjusted net income of $714 million in Q4 2022 reflected a 12% rise from its $640 million figure in the prior-year quarter, driven by sales growth and about 20 bps operating margin expansion.
  • For the full-year 2023, we expect the adjusted EPS to be higher at $1.82 than $1.68 in 2022.

(3) KDP stock looks like it has little room for growth

  • We estimate Keurig Dr Pepper’s Valuation to be around $39 per share, about 9% above the current market price of $36.
  • At its current levels, Keurig Dr Pepper stock is trading at 20x forward earnings, compared to the last three-year average of 21x, implying little room for growth.

P/E Multiples are based on Share Price at the end of the year, and reported (or expected) Adjusted Earnings for the full year.

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While KDP stock has little room for growth, it is helpful to see how Keurig Dr Pepper’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

Furthermore, the Covid-19 crisis has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised at how counter-intuitive the stock valuation is for Globus Medical vs. Keurig Dr Pepper.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

 Returns Apr 2023
MTD [1]
2023
YTD [1]
2017-23
Total [2]
 KDP Return 2% 1% -60%
 S&P 500 Return -1% 6% 82%
 Trefis Multi-Strategy Portfolio -1% 6% 235%

[1] Month-to-date and year-to-date as of 4/26/2023
[2] Cumulative total returns since the end of 2016

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