On Thursday, Truist Securities maintained its Hold rating on shares of Keurig Dr Pepper (NASDAQ:KDP) with a consistent price target of $34.00. The company's third-quarter earnings, released today, showed net sales slightly below Truist's expectations but matched the general consensus.
Keurig Dr Pepper reported net sales of $3.891 billion, compared to Truist's projection of $3.9308 billion and the consensus estimate of $3.924 billion.
Adjusted earnings per share (EPS) for the quarter met both Truist's and the consensus estimates at $0.51. Moreover, Keurig Dr Pepper reaffirmed its full-year 2024 guidance, anticipating mid-single-digit percentage growth in net sales, which translates to an estimated range of approximately $15.3 billion to $15.8 billion.
The company also expects high-single-digit percentage growth in EPS, projecting a range between roughly $1.86 and $1.91. These figures are in line with Wall Street's expectations of $15.365 billion in net sales and an EPS of $1.92.
In a strategic move, Keurig Dr Pepper announced the acquisition of the energy brand Ghost, a private company. The beverage giant has agreed to an initial purchase of a 60% stake for $990 million, with a plan to acquire the remaining 40% in 2028. The transaction is expected to be finalized towards the end of 2024 or at the beginning of 2025.
This acquisition represents an expansion into the energy drink market for Keurig Dr Pepper and highlights the company's efforts to diversify its product portfolio. The financial terms for the remaining stake to be acquired in 2028 have not been disclosed.
In other recent news, Keurig Dr Pepper has announced its strategic acquisition of a 60% stake in sports nutrition brand Ghost, a move aimed at strengthening its foothold in the energy drinks market.
The $990 million deal is expected to complete between late 2024 and early 2025, with plans to acquire the remaining shares by 2028. Ghost, established in 2016, will continue to operate under its co-founders' leadership within Keurig Dr Pepper's U.S. refreshment beverages segment.
In terms of financial assessments, Jefferies has maintained a Buy rating on Keurig Dr Pepper, highlighting an 8% growth for Dr Pepper. The firm's third-quarter earnings per share (EPS) forecast remains at 51 cents. TD Cowen also maintained a Hold rating, but increased the price target to $40, reflecting a revised phasing of the company's earnings estimates. The full-year 2024 EPS estimate stands firm at $1.92.
Deutsche Bank revised its price target to $37, maintaining a Hold rating. Citi upgraded its rating for Keurig Dr Pepper from Neutral to Buy, with a new price target set at $43. These adjustments are in response to the company's recent second-quarter earnings report, which highlighted a 7% increase in earnings per share and a 3.4% rise in constant currency net sales growth.
Keurig Dr Pepper also announced a 7% increase in its annual dividend rate, from $0.86 to $0.92 per share.
InvestingPro Insights
Keurig Dr Pepper's recent financial performance and strategic moves align with several key insights from InvestingPro. The company's impressive gross profit margins, as highlighted by InvestingPro Tips, are evident in the reported Q3 earnings, with a gross profit margin of 55.82% over the last twelve months. This robust profitability supports KDP's ability to invest in acquisitions like Ghost energy drink, expanding its product portfolio.
The company's P/E ratio of 22.32 and adjusted P/E of 21.58 for the last twelve months suggest a reasonable valuation, especially considering the InvestingPro Tip that KDP is trading at a low P/E ratio relative to near-term earnings growth. This could indicate potential upside for investors, particularly as the company reaffirms its guidance for high-single-digit percentage growth in EPS.
Moreover, KDP's dividend yield of 2.51% and a 15% dividend growth over the last twelve months underscore the company's commitment to shareholder returns. This is further supported by the InvestingPro Tip noting that KDP has raised its dividend for 4 consecutive years, a factor that may appeal to income-focused investors.
For those interested in a deeper analysis, InvestingPro offers 5 additional tips and a comprehensive set of financial metrics to further evaluate Keurig Dr Pepper's investment potential.
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