Dr Pepper Snapple Group Inc. 's ( DPS ) first quarter
2013 adjusted earnings (excluding mark-to-market losses/gains) of
53 cents per share surpassed the Zacks Consensus Estimate of 47
cents by 12.8%. Earnings also increased 15.2% year over year
on the back of decent sales growth and increase in adjusted
During the quarter, Dr Pepper's net sales grew 1% year over year
to $1.38 billion as gains from price/mix were offset by lower
volumes. Sales volumes declined 2%. Currency translations had a
neutral impact on revenues in the quarter. Net sales, however
missed the Zacks Consensus Estimate of $1.40 billion by 1.4%.
Overall, sales were down from the prior three quarters.
Gross profit improved 3.0% in the quarter to $796 million.
Adjusted operating income increased 9.7% in the quarter to $204
million on the back of gains from improving productivity.
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.DR PEPPER SNAPL (DPS): Free Stock Analysis
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Sales volume, as discussed earlier, was down 2% in the quarter due
to declines in the Beverage Concentrates and Packaged Beverages
In the quarter, BCS volume declined 2% as both carbonated soft
drinks (CSD) and non-carbonated soft drinks (NCB) volumes dipped 2%
and 4% respectively. In CSD, Dr Pepper soft drink volume declined
3% due to weak performance of the base business and Dr Pepper
Overall volumes of the Core 4 brands (Canada Dry, A&W, Sunkist
soda, and 7UP) remained flat, as the volume gains in Canada Dry and
A&W were offset by declines in Sunkist soda and 7UP.
Canada Dry volumes grew high-single digit while A&W increased
in low single-digits. 7UP declined in low-single digits in the
quarter while Sunkist soda was down in mid single-digits.
Volumes declined for Crush, Sun Drop, RC Cola and Fountain
foodservice during the quarter. Volumes for the remaining CSD
brands were flat for the quarter.
Among the NCBs, growth in Mott's products (11%) was offset by a
decline in Hawaiian Punch (14%) and Snapple tea (2%). Volumes of
Hawaiian Punch and Snapple tea were dragged by increases in prices
and lower brand building activities.
Geographically, volumes declined 2% in U.S. and Canada and
increased 1% in the Caribbean.
Beverage Concentrates: 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 4% (both including and excluding currency
impact) year over year to $263 million as price gains and
favorable mix were partially offset by a 1% volume decline. Segment
operating profit improved 10% (both including and excluding
currency impact) to $154 million driven by revenue growth and lower
Packaged Beverages: 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 $1.02 billion as mix gains and prices
hikes were offset by a volume decline of 4%. Segment operating
profit increased 2% on a currency neutral basis to $114 million due
to productivity gains and a decline in LIFO inventory provision of
$7 million, which partially offset headwinds from higher commodity
costs, particularly apples.
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 6% on
a currency neutral basis to $99 million, driven largely by mix
gains, prices hikes and volume growth of 1%. Segment operating
profit improved 11% (excluding currency) in the quarter to $10
million, driven by sales growth and productivity gains.
The company maintained its prior guidance for fiscal 2013.
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
The company projects cost of goods sold to increase 2% in full
year 2013 due to higher packaging and commodity costs (mainly apple
Full-year tax rate is expected to be about 37%. Capital
expenditure is expected to be nearly 3.5% of net sales.
Dr Pepper carries a Zacks Rank #4 (Sell).
Some other companies from the consumer staple sector that are
performing well include Flower Foods Inc ( FLO ), The
Coca-Cola Company ( KO ) and
Pepsico, Inc. ( PEP ). While Flower
Foods carries a Zacks Rank #1 (Strong Buy), Coca Cola and Pepsico
carry a Zacks Rank #2 (Buy).