Keurig Dr Pepper Inc. KDP reported fourth quarter 2021 results. The bottom line was consistent with the Zacks Consensus estimate, but sales were higher than the Zacks Consensus estimate.
Both metrics have improved over the past year. A solid portfolio demand led to improved results. COVID-related headwinds as well as other challenges such supply-chain disruptions resulting from labor shortages, material availability issues, transportation issues, and inflationary pressure acted deterrently.
Management also mentioned the K-Supreme SMART launch in 2021. This is the company’s first connected brewer. The latest development received positive customer reaction.
KDP shares have increased 5.3% over the last three months, compared to 6.8% industry growth.
The adjusted earnings of 45c per share grew 15.4% year-over-year and met the Zacks Consensus estimate. For the third consecutive quarter, this was double-digit earnings growth. This metric also grew 28.6% over a 2-year period.
The net sales of $3.391 million exceeded the Zacks Consensus Estimate for $3,312million and increased 8.7% over the previous quarter. Growth in the Latin America Beverages, Packaged Beverages and Beverage Concentrates segments drove the upside. Net sales increased 8.5% on a constant currency (cc), driven by an increase in volume/mix of 4.4%, and favorable net price realization at 4.1%.
The company enjoyed a strong in-market performance in the fourth quarter. Dollar consumption increased 12.6% across cold beverage retail bases, including growth in categories like CSDs and premium unflavored water. Sunkist, Dr Pepper, Canada Dry and A&W CSDs, CORE Hydration, Evian, Vita Coco and Polar were key brands that contributed to the company’s growth. KDP’s cold beverage consumption grew by 27% over a 2-year period.
KDP single-serve pods made of coffee rose by 3.4% in the channels that IRi tracked. This can be explained by the strength in partner brands and KDP-owned and licensed brands that partially offset the slowdown in private label pods. KDP saw an 83.5% increase in the dollar market for pods made by KDP during the fourth quarter. The company noticed an improvement in the performance of the away channel during the quarter.
However, this Zacks Rank #4 (Sell ) company says that the increased mobility of consumers has yet to translate into a return–to-office trend. KDP reported that single-serve pods were consumed 11.2% more in the retail market over a period of two years.
The adjusted gross profit increased 47% year-over-year to $1,826 millions, while the adjusted gross margin fell 210 basis points, to 53.8%. This was due in large part to pricing decisions, robust productivity programs, and merger synergies.
The adjusted operating income grew 6.1% over the previous year to $910million, and 11.9% on a 2-year basis. This was due to the strong adjusted gross profit and gains from productivity, merger and its strategic asset investing program. Adjusted operating income increased 5.9% on a cc basis. Due to significant marketing investments, the adjusted operating income decreased 70 basis points to 28.6%.
The segment Coffee Systems saw sales remain flat year-over year, reaching $1,318million. Net sales fell 0.5% at cc with a lower volume/mix and unfavorable price realization of 0.6%. Net price realization was affected a by the continued moderation on strategic pod pricing and customer fines, as well as unfulfilled consumer demand due to supply-chain difficulties and labor shortages. On the flipside, volume/mix was boosted by pod volume growth. This is due to the strength of the at-home business as well the recovery in that business. There were also lower brewer orders.
The packaged beverages segment’s sales totalled $1,530million. This is 17.1% more than the year before. Segment sales rose 17% to cc, thanks to a positive volume/mix of 10.3% as well as a higher net profit realization of 6.7%. CSDs have seen a significant increase, with Dr Pepper and Canada Dry leading the way. Sunkist, A&W and 7UP also helped.
The Beverage concentrates segment saw an increase of 9.2% in sales to $391 million year-over-year. The segment’s net sales increased 8.9% at cc due to a positive net price realization of 9.8%. This was partially offset by a lower volume/mix ratio of 0.9%. Volume/mix was affected by reduced concentrate shipments, but there were some positives. There was also a recovery in fountain foodservice.
The Latin America Beveragessegment saw an 11.8% increase in sales to $152 millions. Net sales at cc increased 12.5% due to volume/mix growth in 3.7% and an 8.8% increase in net price realization. Quarterly segment growth was supported by strong performance in Penafiel, Clamato and Squirt.
Keurig Dr Pepper’s cash, cash equivalents and other cash assets were $567 million as of December 31, 2021. The company also had $11,578 million in long-term obligations and $24,972 million of stockholders equity (non-controlling interest). At the end of 2021, net cash from operating activities was $2,874 millions.
In 2021, the company had a net cash flow of $2.57 trillion. It was able to reduce its total financial obligations by $1.73 Million through the solid free cash flow.
Coca-Cola (KO), which posted quarterly earnings of $0.45 per stock, beat the Zacks Consensus Estimate at $0.40 per share. This compares with earnings of $0.47 per shares a year ago. These numbers are adjusted to account for non-recurring items.
This quarter’s earnings report is a surprise of 12.50%. It was expected that the world’s largest drink maker would report earnings of $0.58 per shares quarter ago. However, earnings actually reached $0.65, which is a surprise of 12.07%.
The company’s consensus EPS estimates have been exceeded four times in the past four quarters.
The Zacks Beverages Soft Drinks industry includes Coke. It posted revenues of $9.46 Billion for the quarter ending December 2021. This was more than the Zacks Consensus Estimate of 6.08%. This is compared to the $8.61 billion revenues year-ago. Over the past four quarters, the company has exceeded consensus revenue estimates four more times.
Based on the most recent numbers, the sustainability of the stock’s price movement and future earnings expectations will largely depend on management’s comments on the earnings call.
The Coke shares have increased by 3.1% over the S&P 500’s decline, which was -3.8%.
What’s next for Coca-Cola?
Although Coke has outperformed this year’s market, investors are left wondering: What’s the next step for the stock?
Although there aren’t easy answers to this question, one reliable indicator that investors can use is the company’s earnings outlook. This includes current consensus earnings estimates for the next quarter(s) and how they have changed in recent months.
Empirical research has shown a strong correlation between near term stock movements and trends of earnings estimate revisions. Investors have two options: track these revisions on their own or rely upon a proven rating tool such as the Zacks Rank. This tool has a strong track record in harnessing the power earnings estimate revisions.
The trend in estimate revisions for Coke is mixed ahead of the earnings release. The company’s earnings report is expected to change the direction and magnitude of the estimate revisions. However, the current Zacks rank for Coke is #3 (Hold). The shares should perform in line the market in the next few months.
It will be interesting for us to see how the estimates for the next quarters and the current fiscal year change over the coming days. Current consensus EPS estimates are $0.57 for $9.69 billion in revenue for the next quarter and $2.41 for $40.84 billion for the current fiscal.
BURLINGTON, Mass. and FRISCO, Texas, Feb. 8, 2022 /PRNewswire/ — Keurig Dr Pepper (NASDAQ: KDP) announced today that its Board of Directors has declared a regular quarterly cash dividend of $0.1875 per share, payable in U.S. dollars, on the Company’s common stock. The regular quarterly dividend will be paid on April 15, 2022 to shareholders of record on April 1, 2022. returned to shareholders as buybacks or dividends.
About Keurig Dr PepperKeurig Dr Pepper is North America’s leading beverage company with an annual revenue of more than $11 billion and almost 27,000 employees. KDP is a leader in soft drinks, specialty coffee, tea, water, juice, juice drinks and mixers. It also markets the #1 single-serve coffee brewing system in Canada and the U.S. The Company’s portfolio includes more than 125 licensed, owned and partner brands. It is able to meet virtually every consumer need at any time. KDP’s strong sales and distribution network allows it to deliver its hot and cold beverages at nearly any point of purchase. Through its Drink Well initiative, the Company is committed in sourcing, producing, and distributing responsibly. Do Good. Corporate responsibility platform that includes efforts around circular packaging and efficient natural resource use.
SBUX is the top growth engine, while SJM is best for momentum and value.
Coffee industry is multilayered and complex. It includes everything from coffee producers and distributors to wholesalers and retailers. Some notable names in the Coffee Industry include Starbucks Corp. ( SBUX), and The J.M. Smucker Co. ( SJM) and Restaurant Brands International Inc.
There is no one sector or ETF for the coffee industry. Coffee-related stocks are found in both the consumer discretionary as well as the consumer staples sectors. Retailers and coffee shops make up the consumer discretionary sector, while producers and packaged-food businesses are in the consumer staples category.
Consumer staples has performed less than the consumer discretionary sector which has slightly outperformed the wider market. The Consumer Staples Select Sector SPDR ETF XLP has had a 19.2% total returns, while the Consumer Discretionary Select Sector SPDR ETF XLY has returned 21.4%. The Russell 1000 has increased 21.9%.
These are the top three most valuable coffee stocks, with the fastest growth and the greatest momentum. All statistics and market performance data in the tables are current as of January 7, 2022.
Best Value Coffee Stocks
These are the stocks that have the lowest trailing 12-month price-to-earnings ratio (P/E). A low P/E ratio means that profits are returned to shareholders as buybacks or dividends.