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Will Keurig's (KDP) Robust Upside Story Continue Despite Woes?
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Keurig Dr Pepper Inc. (KDP - Free Report) displays a remarkable upside story despite the looming effects of the coronavirus pandemic. Strength across its businesses has been the cornerstone of its success. The company witnessed top-line growth in the third quarter of 2021, driven by growth across all business segments, with the Beverage Concentrates and Latin America Beverages segments posting strong double-digit growth.
In third-quarter 2021, the company's bottom line met the Zacks Consensus Estimate, while sales surpassed the same. Both metrics improved year over year. Results gained from a solid top-line momentum. KDP witnessed strong market share gains, and in-market performances across categories and brands in the quarter.
The Zacks Rank #3 (Hold) company has a market capitalization of $49.9 billion. Year to date, KDP has gained 6.2% compared with the industry's growth of 3.3%. It also compares favorably against the Consumer Staples sector's decline of 0.3%.
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In the past 30 days, the company's estimates for 2021 earnings per share have been unchanged. For fiscal 2021, its earnings estimates are pegged at $1.60 per share, suggesting 14.3% growth from the year-ago period.
Here's Why Keurig Dr Pepper Should Retain the Momentum
Keurig is likely to retain its strong performance in the Packaged Beverages segment, attributable to growth in CSDs, particularly Dr Pepper, Canada Dry, Sunkist, A&W, 7UP, and Squirt as well as growth in Polar and Mott's. Favorable volume/mix and higher net price realization have been aiding the segment's sales. Also, strong market share growth is anticipated to keep aiding the segment's performance in the near term.
Keurig witnessed a strong in-market performance in the third quarter. The company recorded dollar consumption growth of 6.8% across the cold beverage retail base, including improvement in categories such as CSDs, premium unflavored water, enhanced flavored water, apple juice, apple sauce, and coconut water. Dr Pepper, Sunkist, Canada Dry, A&W and Squirt CSDs, Evian, Bai, Vita Coco, Polar, and Mott's apple juice and apple sauce were the key brands aiding growth.
KDP's carbonated soft drinks have been gaining traction, driven by core brand growth and successful innovation, particularly its new-zero sugar variety. Sunkist emerged to become the leading fruit-flavored CSD brand with double-digit consumption growth, followed by the solid performance in Canada Dry, A&W and Squirt. The Dr Pepper brand is also performing well on robust consumption growth.
The company's manufactured pods and tracked channels witnessed year-over-year market share growth of 83% in the third quarter. Brewer shipments rose 2.2% in the quarter, while brewer sales rallied 44% on a two-year basis. Management launched Keurig Supreme Plus SMART in July only on its website. The product comes with the MultiStream Technology and features the new BrewID technology. The latest innovation will likely be rolled out in stores in the holiday season.
Driven by the impressive third-quarter results, Keurig raised its constant-currency sales view for 2021 and reiterated its adjusted earnings guidance. The company expects constant-currency net sales growth of 7-8% compared with 6-7% growth mentioned earlier. Management continues to expect adjusted earnings growth of 13-15%, backed by improved sales and any increase in profits anticipated to be reinvested in its business.
Management is on track with prudent cost-management actions. Investments in marketing, product innovation and technology upgrades are likely to yield results.
Hurdles to Overcome
Like others in the industry, Keurig continues to witness headwinds related to input cost inflation, labor shortages, rising transportation and logistics costs, and supply-chain disruptions, which are likely to persist for the rest of the year. Management is currently experiencing higher-than-anticipated inflation. It expects inflation, including the cost of goods sold, transportation, warehousing and logistics, and SG&A, to rise 6% year over year in 2021.
Headwinds related to the supply chain affected the non-carb beverage unit's sales in the third quarter of 2021. Alongside these, reduced government stimulus remains concerning.
Stocks to Watch
We have highlighted some better-ranked stocks from the broader Consumer Staples space, namely United Natural Foods (UNFI - Free Report) , MGP Ingredients (MGPI - Free Report) and Hershey (HSY - Free Report) .
United Natural currently sports a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of 13.1%, on average. Shares of UNFI have surged 211.3% year to date.
The Zacks Consensus Estimate for United Natural's current financial-year sales suggests growth of 4.1% and that for earnings per share reflects growth of 5.2% from the year-ago period's reported figure.
MGP Ingredients, a Zacks Rank #1 stock, has a trailing four-quarter earnings surprise of 117.6%, on average. The MGPI stock has gained 65.7% year to date.
The Zacks Consensus Estimate for MGP Ingredients' current financial-year sales and earnings per share suggests growth of 55.5% and 61.4%, respectively, from the year-ago period's reported numbers.
Hershey currently carries a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 4.4%, on average. Shares of the company have gained 16.5% in the year-to-date period.
The Zacks Consensus Estimate for Hershey's current financial-year sales and earnings per share suggests growth of 8.9% and 12.6%, respectively, from the year-ago period. HSY has an expected long-term earnings growth rate of 8.5%.
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Will Keurig's (KDP) Robust Upside Story Continue Despite Woes?
Keurig Dr Pepper Inc. (KDP - Free Report) displays a remarkable upside story despite the looming effects of the coronavirus pandemic. Strength across its businesses has been the cornerstone of its success. The company witnessed top-line growth in the third quarter of 2021, driven by growth across all business segments, with the Beverage Concentrates and Latin America Beverages segments posting strong double-digit growth.
In third-quarter 2021, the company's bottom line met the Zacks Consensus Estimate, while sales surpassed the same. Both metrics improved year over year. Results gained from a solid top-line momentum. KDP witnessed strong market share gains, and in-market performances across categories and brands in the quarter.
The Zacks Rank #3 (Hold) company has a market capitalization of $49.9 billion. Year to date, KDP has gained 6.2% compared with the industry's growth of 3.3%. It also compares favorably against the Consumer Staples sector's decline of 0.3%.
In the past 30 days, the company's estimates for 2021 earnings per share have been unchanged. For fiscal 2021, its earnings estimates are pegged at $1.60 per share, suggesting 14.3% growth from the year-ago period.
Here's Why Keurig Dr Pepper Should Retain the Momentum
Keurig is likely to retain its strong performance in the Packaged Beverages segment, attributable to growth in CSDs, particularly Dr Pepper, Canada Dry, Sunkist, A&W, 7UP, and Squirt as well as growth in Polar and Mott's. Favorable volume/mix and higher net price realization have been aiding the segment's sales. Also, strong market share growth is anticipated to keep aiding the segment's performance in the near term.
Keurig witnessed a strong in-market performance in the third quarter. The company recorded dollar consumption growth of 6.8% across the cold beverage retail base, including improvement in categories such as CSDs, premium unflavored water, enhanced flavored water, apple juice, apple sauce, and coconut water. Dr Pepper, Sunkist, Canada Dry, A&W and Squirt CSDs, Evian, Bai, Vita Coco, Polar, and Mott's apple juice and apple sauce were the key brands aiding growth.
KDP's carbonated soft drinks have been gaining traction, driven by core brand growth and successful innovation, particularly its new-zero sugar variety. Sunkist emerged to become the leading fruit-flavored CSD brand with double-digit consumption growth, followed by the solid performance in Canada Dry, A&W and Squirt. The Dr Pepper brand is also performing well on robust consumption growth.
The company's manufactured pods and tracked channels witnessed year-over-year market share growth of 83% in the third quarter. Brewer shipments rose 2.2% in the quarter, while brewer sales rallied 44% on a two-year basis. Management launched Keurig Supreme Plus SMART in July only on its website. The product comes with the MultiStream Technology and features the new BrewID technology. The latest innovation will likely be rolled out in stores in the holiday season.
Driven by the impressive third-quarter results, Keurig raised its constant-currency sales view for 2021 and reiterated its adjusted earnings guidance. The company expects constant-currency net sales growth of 7-8% compared with 6-7% growth mentioned earlier. Management continues to expect adjusted earnings growth of 13-15%, backed by improved sales and any increase in profits anticipated to be reinvested in its business.
Management is on track with prudent cost-management actions. Investments in marketing, product innovation and technology upgrades are likely to yield results.
Hurdles to Overcome
Like others in the industry, Keurig continues to witness headwinds related to input cost inflation, labor shortages, rising transportation and logistics costs, and supply-chain disruptions, which are likely to persist for the rest of the year. Management is currently experiencing higher-than-anticipated inflation. It expects inflation, including the cost of goods sold, transportation, warehousing and logistics, and SG&A, to rise 6% year over year in 2021.
Headwinds related to the supply chain affected the non-carb beverage unit's sales in the third quarter of 2021. Alongside these, reduced government stimulus remains concerning.
Stocks to Watch
We have highlighted some better-ranked stocks from the broader Consumer Staples space, namely United Natural Foods (UNFI - Free Report) , MGP Ingredients (MGPI - Free Report) and Hershey (HSY - Free Report) .
United Natural currently sports a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of 13.1%, on average. Shares of UNFI have surged 211.3% year to date.
You can see the complete list of today's Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for United Natural's current financial-year sales suggests growth of 4.1% and that for earnings per share reflects growth of 5.2% from the year-ago period's reported figure.
MGP Ingredients, a Zacks Rank #1 stock, has a trailing four-quarter earnings surprise of 117.6%, on average. The MGPI stock has gained 65.7% year to date.
The Zacks Consensus Estimate for MGP Ingredients' current financial-year sales and earnings per share suggests growth of 55.5% and 61.4%, respectively, from the year-ago period's reported numbers.
Hershey currently carries a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 4.4%, on average. Shares of the company have gained 16.5% in the year-to-date period.
The Zacks Consensus Estimate for Hershey's current financial-year sales and earnings per share suggests growth of 8.9% and 12.6%, respectively, from the year-ago period. HSY has an expected long-term earnings growth rate of 8.5%.