Keurig Dr Pepper (NASDAQ:KDP) Reports Sales Below Analyst Estimates In Q3 Earnings
Beverage company Keurig Dr Pepper (NASDAQ:KDP) met Wall Street’s revenue expectations in Q3 CY2024, with sales up 2.3% year on year to $3.89 billion. Its non-GAAP profit of $0.51 per share wasalso in line with analysts’ consensus estimates.
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Keurig Dr Pepper (KDP) Q3 CY2024 Highlights:
- Revenue: $3.89 billion vs analyst estimates of $3.92 billion (in line)
- Adjusted EPS: $0.51 vs analyst expectations of $0.51 (in line)
- KDP reaffirmed its fiscal 2024 guidance for constant currency net sales growth in a mid-single-digit range and Adjusted diluted EPS growth in a high-single-digit range
- EBITDA: $1.19 billion vs analyst estimates of $1.18 billion (1% beat)
- Gross Margin (GAAP): 55%, in line with the same quarter last year
- Operating Margin: 23.2%, in line with the same quarter last year
- EBITDA Margin: 30.6%, up from 29.3% in the same quarter last year
- Sales Volumes rose 4% year on year (-1.4% in the same quarter last year)
- Market Capitalization: $49.77 billion
Commenting on the results, CEO Tim Cofer stated, "Three quarters into the year, we remain on track to achieve our full year outlook, while notching significant progress against our multi-year strategic agenda. This morning's exciting announcement of our acquisition of GHOST is yet another such step, accelerating our portfolio evolution toward growth-accretive and consumer-preferred spaces. In Q3, we were encouraged by further improvement in our volume/mix performance despite a muted operating environment, and also demonstrated building cost discipline throughout the organization. Both are important elements underpinning our confidence as we focus on a strong finish to 2024 and plan for a healthy 2025."
Company Overview
Born out of a 2018 merger between coffee company Keurig Green Mountain and beverage company Dr Pepper Snapple, Keurig Dr Pepper (NASDAQ:KDP) boasts a powerhouse portfolio of beverages.
Beverages, Alcohol and Tobacco
These companies' performance is influenced by brand strength, marketing strategies, and shifts in consumer preferences. Changing consumption patterns are particularly relevant and can be seen in the rise of cannabis, craft beer, and vaping or the steady decline of soda and cigarettes. Companies that spend on innovation to meet consumers where they are with regards to trends can reap huge demand benefits while those who ignore trends can see stagnant volumes. Finally, with the advent of the social media, the cost of starting a brand from scratch is much lower, meaning that new entrants can chip away at the market shares of established players.
Sales Growth
A company’s long-term performance is an indicator of its overall business quality. While any business can experience short-term success, top-performing ones enjoy sustained growth for multiple years.
Keurig Dr Pepper is one of the larger consumer staples companies and benefits from a well-known brand that influences consumer purchasing decisions. However, its scale is a double-edged sword because it's harder to find incremental growth when you've already penetrated the market.
As you can see below, Keurig Dr Pepper’s sales grew at a mediocre 6.9% compounded annual growth rate over the last three years, but to its credit, consumers bought more of its products.
This quarter, Keurig Dr Pepper grew its revenue by 2.3% year on year, and its $3.89 billion of revenue was in line with Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 4.6% over the next 12 months, a slight deceleration versus the last three years. This projection doesn't excite us and indicates the market believes its products will see some demand headwinds.
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Volume Growth
Revenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful staples business as there’s a ceiling to what consumers will pay for everyday goods; they can always trade down to non-branded products if the branded versions are too expensive.
Keurig Dr Pepper’s quarterly sales volumes have, on average, stayed about the same over the last two years. This stability is normal because the quantity demanded for consumer staples products typically doesn’t see much volatility.
In Keurig Dr Pepper’s Q3 2024, sales volumes jumped 4% year on year. This result was a well-appreciated turnaround from the 1.4% year-on-year decline it posted 12 months ago, showing the company is heading in the right direction.
Key Takeaways from Keurig Dr Pepper’s Q3 Results
It was good to see Keurig Dr Pepper beat analysts’ EBITDA expectations this quarter. On the other hand, its gross margin missed analysts’ expectations and its revenue missed Wall Street’s estimates. The company reaffirmed prior full year guidance. Overall, this was a weaker quarter. The stock traded down 2.3% to $35.88 immediately following the results.
Keurig Dr Pepper’s latest earnings report disappointed. One quarter doesn’t define a company’s quality, so let’s explore whether the stock is a buy at the current price. If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free.
