On Wednesday, Jefferies maintained a Buy rating on Keurig Dr Pepper (NASDAQ:KDP) shares while increasing the stock's price target from $39.00 to $42.00. The firm highlighted the robust performance of the U.S. Beverage business, particularly noting Dr Pepper's 8% growth. Moreover, partner brands are reported to be performing well.
Despite the positive outlook for the U.S. market, the firm anticipates a weaker quarter for Keurig Dr Pepper's International business, primarily due to economic challenges in Mexico and the depreciation of the Mexican Peso. As a result, Jefferies has slightly lowered its third-quarter sales estimate for the company by 0.3 percentage points to a growth of 3%.
However, the earnings per share (EPS) forecast for the third quarter remains unchanged at 51 cents. The firm's adjustment reflects a balanced view of Keurig Dr Pepper's prospects, with strong domestic performance potentially being counterbalanced by international headwinds.
Keurig Dr Pepper is scheduled to report its earnings before the market opens on October 24th. The report will provide investors with a comprehensive view of the company's financial performance and the accuracy of Jefferies' projections.
In other recent news, Keurig Dr Pepper is experiencing a series of financial adjustments. TD Cowen maintained a Hold rating on the company's shares, but increased the price target to $40, reflecting a revised phasing of the company's earnings estimates.
The full-year 2024 earnings per share (EPS) estimate stands firm at $1.92. Meanwhile, Deutsche Bank revised its price target to $37, also maintaining a Hold rating. Citi upgraded its rating for Keurig Dr Pepper from Neutral to Buy, with a new price target set at $43, driven by expected improvements in the U.S. Coffee segment.
Keurig Dr Pepper's recent second-quarter earnings report highlighted a 7% increase in earnings per share and a 3.4% rise in constant currency net sales growth. The company also announced a 7% increase in its annual dividend rate, from $0.86 to $0.92 per share.
In other developments, Keurig Dr Pepper agreed to pay a $1.5 million civil penalty to the U.S. Securities and Exchange Commission (SEC) to settle charges related to misleading statements about the recyclability of its K-Cup pods. These are recent developments in the financial landscape of Keurig Dr Pepper.
InvestingPro Insights
Keurig Dr Pepper's financial metrics and market performance align well with Jefferies' optimistic outlook. According to InvestingPro data, KDP's revenue growth stands at 3.4% for the last twelve months, closely matching Jefferies' adjusted third-quarter sales growth estimate of 3%. The company's impressive gross profit margin of 55.82% underscores its strong market position, particularly in the U.S. Beverage business.
InvestingPro Tips highlight that KDP has raised its dividend for 4 consecutive years, with a current dividend yield of 2.49%. This consistent dividend growth, coupled with the stock's low price volatility, may appeal to income-focused investors. Moreover, KDP's PEG ratio of 0.61 suggests the stock might be undervalued relative to its earnings growth potential, supporting Jefferies' Buy rating and increased price target.
For readers seeking a more comprehensive analysis, InvestingPro offers 7 additional tips for KDP, providing deeper insights into the company's financial health and market position.
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