Wells Fargo Cuts Dr Pepper Snapple to “Neutral”; High Costs, Lower Volumes (DPS)

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Beverage maker Dr Pepper Snapple Group Inc. ( DPS ) on Friday caught a big downgrade from analysts at Wells Fargo.

The firm said it cut its rating on DPS from "Outperform" to "Market Perform," also lowering its valuation range from $43-45 down to $36-$38. That new range suggests zero upside to the stock's Thursday closing price of $37.96.

A Wells analyst said the firm has "Expectations Of Challenging 2012. Our downgrade is based on the following four reasons: 1) 2012 volumes are likely to be softer than we had anticipated, 2) Commodity costs continue to challenge fundamental improvement, 3) RCI visibility has not improved, and 4) a Higher tax rate. Bottom line - we think fundamentals imply 2012 EPS estimates are too high and we recommend investors stay on the sidelines until DPS issues its 2012 outlook in mid-February. We reduce our valuation range to $36-38 from $43-45, and lower Q4, 2011, and 2012 EPS estimates to $0.76, $2.73, and $2.85, from $0.77, $2.74, and $3.00."

Dr Pepper Snapple shares were unchanged in premarket trading Friday.

The Bottom Line
Shares of Dr. Pepper Snapple Group ( DPS ) have a 3.37% dividend yield, based on last night's closing stock price of $37.96. The stock has technical support in the $35 price area. If the shares can firm up, we see overhead resistance around the $40 price level.

Dr Pepper Snapple Group Inc. ( DPS ) is not recommended at this time, holding a Dividend.com 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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