Dr Pepper Snapple
) fourth quarter 2012 adjusted earnings (excluding mark-to-market
losses/gains) of 82 cents per share missed the Zacks Consensus
Estimate of 85 cents by 3.5%. Earnings also declined 2.4%
year over year as decent sales growth was offset by weak
During the quarter, Dr Pepper's net sales grew 2% year over
year at $1.48 billion as gains from pricing and currency were
offset by volume declines. Excluding 1% currency tailwind,
revenue improved 1% in the quarter. Net sales, however missed the
Zacks Consensus Estimate of $1.496 billion.
Overall, sales were down from both the second and third
quarter levels. Dr Pepper provided its outlook for fiscal 2013
and raised its quarterly dividend rate by 12% from 34 cents to 38
Gross profit improved 1.6% in the quarter to $879 million as
top-line growth offset headwinds from higher cost of sales.
Adjusted operating income declined 1% in the quarter to $293
million as gains from gross margin expansion, ongoing
productivity and lower marketing costs were offset by increased
labor costs and higher LIFO inventory provision.
Volume Growth in Detail
Dr Pepper Snapple manufactures and distributes a variety of
flavored carbonated soft drinks (CSDs) and non-carbonated
beverages (NCBs). Dr Pepper owns some well-established CSD brands
such as Dr Pepper soft drink, 7UP, Canada Dry, Schweppes ginger
ale, Peñafiel mineral water, Royal Crown Cola and many more.
Popular NCB brands include Snapple tea, Hawaiin Punch, Mott's
apple juice and sauce, Aquafiel mineral water and Clamato tomato
juice among others.
Dr Pepper's sales volume is measured in two ways: 1) sales
volume and 2) bottler case sales (BCS) volume. Sales volume
represents sales of concentrates and finished beverages sold to
bottlers, retailers and distributors. Bottler case sales include
sales of packaged beverages by the company and its bottlers to
retailers and independent distributors.
In the quarter, BCS volume growth was flat as both CSD's and
NCBs recorded flat volumes. In-fact, volumes improved
sequentially from a 3% decline in the third quarter.
In CSD, Dr Pepper soft drink volume declined 1% due to strong
prior-year comparisons, which included heavy pricing and
promotional activity to support the launch of low calorie drink,
Dr Pepper Ten.
Volumes of the core 5 brands (Canada Dry, A&W and Sunkist
soda, 7up and Sun Drop) increased 3%, driven by volume gains in
Canada Dry, A&W and Sunkist soda. Canada Dry posted growth in
the high single-digit range, showing maximum increase among the
core brands. Fountain food service volume went up by 1% year over
Among the NCBs, growth in Clamato tomato juice, Aguafiel
water, Mott's apple juice and sauce and Snapple tea was offset by
a decline in Hawaiian Punch. Clamato recorded the maximum
increase of 34%.
Geographically, volumes were flat in U.S. and Canada and
increased 8% in Mexico and the Caribbean. Sales volume, as
discussed earlier, was down 1% in the quarter.
: The division manufactures and sells beverage concentrates in
the U.S. and Canada, which is used primarily to produce CSDs. Dr
Pepper's net sales from Beverage Concentrates went up 2% (both
including and excluding currency impact) year over year to
$333 million, as price gains and favorable mix were partially
offset by a 2% volume decline. Segment operating profit improved
5% (both including and excluding currency impact) to $223 million
driven by revenue growth and lower marketing investments than the
: The division manufactures and distributes finished packaged
beverages (both CSDs and NCBs) and other products, including its
own brands, third party brands and private label beverages in the
U.S. and Canada. In the Packaged Beverages segment, net sales
were flat (both including and excluding currency impact) at $1.04
billion, as mix gains were offset by a volume decline of 1%.
Segment operating profit increased 3% on a currency neutral basis
to $131 million due to productivity gains, which partially offset
headwinds from higher labor costs and a LIFO inventory
Latin America Beverages
: The division manufactures and distributes carbonated mineral
water, flavored CSD, bottled water and vegetable juice in Mexico
and the Caribbean. Dr Pepper's net sales from Latin America
Beverages increased 7% on a currency neutral basis to $107
million, driven largely by volume growth of 8%. Segment operating
profit improved 56% (both including and excluding currency) in
the quarter to $14 million, driven by sales growth and
In fiscal 2012, the company witnessed a 2.0% increase in
revenues to $6.0 billion, slightly missing the Zacks Consensus
Estimate of $6.01 billion. Sales increase was just in line with
management's guidance of approximately 2% growth.
We would like to remind investors that the revenue guidance
was previously slashed at the third quarter conference call in
Oct 2012. Dr Pepper had pulled down revenue expectations to
approximately 2% from the prior guidance of an increase at the
lower end of its long-term forecast of 3% to 5% due to
weaker-than-expected volume growth.
Adjusted earnings were $2.92 per share, which also missed the
Zacks Consensus Estimate of $2.95 by 1%. Adjusted earnings
increased 2.5% from the prior year. Full-year 2012 adjusted
earnings were at the lower end of the guidance range of $2.90 to
$2.98 per share.
Full-year 2013 adjusted earnings are expected to be in the
range of $3.04 to $3.12 per share. Dr Pepper expects 2013 sales
to grow approximately 3%. The company projects cost of goods sold
to increase by 2% in full year 2013, due to higher packaging and
commodity costs. Full-year tax rate is expected to be about 37%.
Capital expenditure is expected to be nearly 3.5% of net
Other Stocks to Consider
Dr Pepper currently carries a Zacks Rank #3 (Hold). Rival,
The Coca-Cola Company
) reported mixed fourth quarter results yesterday; beating on
earnings and lagging on sales.
Among other beverage companies, a few of Coca-Cola's bottling
companies are currently doing well and have a bright outlook.
Coca-Cola FEMSA S.A.B de C.V
Coca-Cola Enterprises Inc.
), both carrying a Zacks Rank #2 (Buy).
COCA-COLA ENTRP (CCE): Free Stock Analysis
DR PEPPER SNAPL (DPS): Free Stock Analysis
COCA COLA CO (KO): Free Stock Analysis Report
COCA-COLA FEMSA (KOF): Free Stock Analysis
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