Dr Pepper Snapple Group Inc.
) second quarter 2013 adjusted earnings (excluding mark-to-market
losses/gains) of 84 cents per share were in line with the Zacks
Consensus Estimate. However, earnings decreased 1.2% year over
year due to weak top line performance as well as sluggish
During the quarter, Dr Pepper's net sales declined 1% year over
year to $1.61 billion as gains from price/mix were offset by
lower volumes. Sales volumes declined 4%. Currency translations
had a favorable impact on revenues in the quarter. Net sales also
missed the Zacks Consensus Estimate of $1.63 billion by 1.2%.
However, sales improved sequentially from the prior three
Adjusted gross profit declined 0.3% in the quarter to $940
million, due to weak sales and increased commodity costs
(especially apple costs). Adjusted segment operating profit
declined 3% year over year due to weak gross margins and
increased marketing costs.
Volume Growth in Detail
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.
Sales volume, as discussed earlier, was down 4% in the quarter
due to declines in the Beverage Concentrates and Packaged
In the quarter, BCS volume declined 3% as carbonated soft
drinks (CSD) and non-carbonated soft drinks (NCB) volumes dipped
3% and 2%, respectively. In CSD, Dr Pepper soft drinks volume
declined 4% due to weak performance of the base business.
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Overall volumes of the Core 4 brands (Canada Dry, A&W,
Sunkist soda, and 7UP) declined 1%, as volume gains in Canada Dry
were offset by declines in Sunkist soda and 7UP.
Canada Dry volumes grew mid-single digit. 7UP declined in
mid-single digits in the quarter while Sunkist soda was down in
high single-digits. Volumes declined for Crush, Sun Drop,
RC Cola and Fountain foodservice during the quarter.
Among the NCBs, growth in Mott's products (2%) and Snapple (4%)
was partially offset by a decline in Hawaiian Punch (7%).
Geographically, volumes declined 4% in the U.S. and Canada but
increased 2% in Mexico and the Caribbean.
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
$336 million as favorable mix and lower discounts were partially
offset by a 5% volume decline. Segment operating profit declined
4% (both including and excluding currency impact) to $205 million
as revenue growth was offset by higher marketing expenses and
unclaimed property audit charges.
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
declined 2% (both including and excluding currency impact) to
$1.15 billion as mix gains and prices hikes were offset by a
volume decline of 5%. Segment operating profit decreased 3% on a
currency neutral basis to $145 million due to headwinds from
higher commodity costs, particularly apples and weak sales
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 5% on a currency neutral basis to $127
million, driven largely by mix gains and volume growth of 2%.
Segment operating profit was flat (excluding currency) in the
quarter at $18 million as sales growth and productivity gains
were offset by increasing manufacturing cost and other operating
The company maintained its prior earnings guidance for fiscal
2013. Full year 2013 adjusted earnings are expected to be in the
range of $3.04 to $3.12 per share. However, Dr Pepper reduced its
2013 sales guidance. The company now expects sales to increase 2%
compared to the prior expectation of 3% growth.
Dr Pepper carries a Zacks Rank #4 (Sell).
Some other companies from the consumer staples sector that are
performing well include
Monster Beverage Corporation
The WhiteWave Foods Company
). All the three companies carry a Zacks Rank #2 (Buy).