KDP Lost 18% In A Month. Do You Buy Or Wait?
Keurig Dr Pepper (KDP) stock is down 18.5% in 21 trading days. While history suggests price dips recover, there is risk – specific to balance sheet. Consider the following data:
- Size: A $38 Bil company with $16 Bil in revenue currently trading at $27.63.
- Fundamentals: Last 12 month revenue growth of 4.6% and operating margin of 21.5%.
- Liquidity: Has Debt to Equity ratio of 0.5 and Cash to Assets ratio of 0.01
- Valuation: Currently trading at P/E multiple of 24.4 and P/EBIT multiple of 13.9
- Has one instance since 2010 where it dipped >30% in < 30 days and subsequently returned 77.7% within a year. See KDP Dip Buy Analysis.
While we like to buy dips if the fundamentals check out – for KDP, see Buy or Sell KDP Stock – we are wary of falling knives. Specifically, it is worth trying to answer if things get really bad, and KDP drops another 20-30% to $19.34 levels, will we be able to hold on to the stock? What is the worst case scenario? We call it downturn resilience.
Below is a deep dive into Keurig Dr Pepper (KDP) downturn resilience – specifically, its performance vs the market during past crises? Turns out, the stock saw an impact slightly better than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.
Below are the details, but before that, as a quick background: KDP operates as a beverage company offering coffee systems, packaged beverages, concentrates, and Latin American products to retailers, distributors, restaurants, hotels, offices, and consumers.
2022 Inflation Shock
- KDP stock fell 30.4% from a high of $40.08 on 16 August 2022 to $27.90 on 12 October 2023 vs. a peak-to-trough decline of 25.4% for the S&P 500.
- The stock is yet to recover to its pre-Crisis high
- The highest the stock has reached since then is $38.01 on 23 September 2024 , and currently trades at $27.63
| KDP | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -30.4% | -25.4% |
| Time to Full Recovery | Not Fully Recovered days | 464 days |
2020 Covid Pandemic
- KDP stock fell 33.6% from a high of $29.50 on 21 February 2020 to $19.60 on 16 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
- However, the stock fully recovered to its pre-Crisis peak by 16 July 2020
| KDP | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -33.6% | -33.9% |
| Time to Full Recovery | 122 days | 148 days |
2018 Correction
- KDP stock fell 13.6% from a high of $28.52 on 9 November 2018 to $24.64 on 18 December 2018 vs. a peak-to-trough decline of 19.8% for the S&P 500.
- However, the stock fully recovered to its pre-Crisis peak by 26 April 2019
| KDP | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -13.6% | -19.8% |
| Time to Full Recovery | 129 days | 120 days |
2008 Global Financial Crisis
- KDP stock fell 55.1% from a high of $26.52 on 12 September 2008 to $11.90 on 9 March 2009 vs. a peak-to-trough decline of 56.8% for the S&P 500.
- However, the stock fully recovered to its pre-Crisis peak by 20 August 2009
| KDP | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -55.1% | -56.8% |
| Time to Full Recovery | 164 days | 1480 days |
Worried that KDP could fall much more? You could take a look at the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.