Dr Pepper Snapple Group Inc.
) first-quarter 2014 adjusted earnings of 74 cents per share beat
the Zacks Consensus Estimate of 59 cents by 25.4%. Moreover,
earnings increased 40% year over year attributable to strong
margins and solid revenues from Beverage Concentrates and Latin
During the quarter, Dr Pepper's net sales rose 1% year over year
to $1.40 billion on the back of improving sales volumes, price
increases and favorable product/package mix, offset by
unfavorable currency translation and segment mix. Sales volume
rose 1% year over year. Currency neutral net sales rose 2% in the
quarter. Net sales beat the Zacks Consensus Estimate of $1.38
billion by 1.5%.
Adjusted gross profit improved 4.5% in the quarter to $832
million. Adjusted operating income increased 21.6% year over year
to $248 million during the quarter driven by productivity
improvements and lower marketing and people-related expenses.
Adjusted operating margins grew 290 basis points to 17.7% in the
The effective tax rate was 34.4% in the quarter, lower than 36.4%
in the prior year quarter as New York State reduced the effective
tax rate by 0.9%
Volumes 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. BCS includes the sale of packaged
beverages by the company and its bottlers to retailers and
Sales volume, as discussed earlier, was up 1% in the quarter
driven by a 2% volume gain in the Latin American segment and a 3%
volume gain in Beverage Concentrates.
In the quarter, BCS volume declined 1% as CSDs dipped 1% and
non-carbonated beverages (NCB) volume dipped 2%. Dr Pepper soft
drink volume declined 4% due to CSD category headwinds.
Overall volumes of the Core 4 brands (Canada Dry, A&W,
Sunkist soda and 7UP), including TEN versions, remained flat as
gains in Canada Dry were offset by declines in Sunkist soda and
A&W. Canada Dry volumes grew mid-single digits. 7UP remained
flat in the quarter while Sunkist soda was down mid-single
digits. A&W was down mid-single digits as well.
In terms of volumes, Peñafiel water increased in double digits
due to strong sales from new products. However, the Fountain food
service decreased 3% during the quarter. Also, Squirt decreased
Among the NCBs, growth in Snapple (2%) and Clamato (3%) was
partially offset by a decline in Hawaiian Punch (8%) and Mott's
Geographically, volumes declined 2% in the U.S. and Canada but
increased 3% in Mexico and the Caribbean.
Dr Pepper's net sales from Beverage Concentrates went up 8% year
over year (on a currency neutral basis) to $281 million due to
tailwinds from price increases, 3% volume increase and favorable
timing of concentrate shipment. Segment operating profit rose 14%
(on a currency neutral basis) to $174 million owing to net sales
increase and lower marketing expenses.
In the Packaged Beverages segment, net sales declined 1% on a
currency neutral basis to $1.01 billion due to flattish volumes.
Segment operating profit rose 16% year over year (excluding
currency impact) to $131 million due to tailwinds from higher
productivity, favorable input cost and lower people costs
Latin America Beverages:
Dr Pepper's net sales from Latin America Beverages increased 17%
on a currency neutral basis to $111 million, driven largely by
mix gains, increased prices and volume growth of 2%. Segment
operating profit increased 63% (excluding currency) in the
quarter to $13 million as sales growth and productivity gains
offset increasing transportation costs.
The company maintained its previously provided guidance for 2014.
Owing to the continued CSD category headwinds, Dr Pepper expects
full-year 2014 net sales to be flat to up approximately 1% year
For full-year 2014, adjusted earnings per share are expected in
the range of $3.38 to $3.46, representing an upside from 2013
levels. The company expects lower packaging and commodity costs
to reduce the cost of goods sold (COGS) by 2% in 2014.
The full-year tax rate is expected to be about 35.5%, same as in
2013. Capital expenditure is expected to be nearly 3% of net
sales. The company plans to repurchase approximately $375 to $400
million worth of shares in 2014.
Dr Pepper's carries a Zacks Rank #3 (Hold).
Other better-ranked companies from the consumer goods sector
Coca-Cola Amatil Ltd.
), carrying a Zacks Rank #1 (Strong Buy) and
Coca-Cola Enterprises Inc.
Monster Beverage Corp.
), carrying a Zacks Rank #2 (Buy).
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