Deutsche Bank Upgrades Dr Pepper Snapple Group to “Buy”; Valuation Call (DPS)

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Beverage giant Dr Pepper Snapple Group Inc. ( DPS ) caught a big upgrade on Friday from analysts at Deutsche Bank, who cited the company's low relative valuation.

The firm boosted its rating on DPS to "Buy" from "Hold," but maintained its $39 price target. That target represents an expected 15% upside to the stock's Thursday closing price of $33.94.

A Deutsche Bank analyst commented, "We believe the market has over-reacted to management's more cautious tone on 2H revenue mix, and that underlying trends remain healthy. We are lowering Q3 estimate to account for softer mix as consumers favors lower-priced brands, but think it is more than reflected in the stock, and the sell-off creates a good buying opportunity."

Dr Pepper Snapple shares rose 37 cents, or +1.1% in premarket trading Friday.

The Bottom Line
We had removed shares of DPS back on Aug.24, when the stock was trading at $36.53. The company has a 2.95% dividend yield, based on last night's closing stock price of $33.94. The stock has technical support in the $30-$32 price area. If the shares can firm up, we see overhead resistance around the $36-$38 price levels. We would remain on the sidelines for now.

Dr Pepper Snapple Group Inc. ( DPS ) is not recommended at this time, holding a DARS™ Rating of 3.4 out of 5 stars.

Be sure to visit our complete recommended list of the Best Dividend Stocks , as well as a detailed explanation of our ratings system here .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

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This article appears in: Investing , Stocks

Referenced Stocks: DPS

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