Factors to Consider
Dr Pepper Snapple Group Inc.
) is set to report second quarter 2013 results on Jul 24. Last
quarter, it posted a 12.77% positive surprise. Let's see how
things are shaping up for this announcement.
Dr Pepper has been witnessing sluggish top-line growth on account
of weak volumes for the past few quarters. Sales volume has been
down due to difficult operating conditions faced by the
carbonated beverages (CSD) segment in North America. Changing
consumer preferences, increasing health consciousness and rising
obesity concerns, possible new taxes on sugar-sweetened beverages
and growing regulatory pressures have transformed the carbonated
beverages category to a sluggish growth category in North
America. These category headwinds are significantly affecting Dr
Pepper's CSD volumes, which comprise around 80% of its business.
We believe CSD volumes will continue to lag this quarter. Poor
weather conditions in North America may further pull down
Second-quarter profits are expected to be hurt by higher
marketing investments and difficult year-over-year
comparisons. Sales in the second quarter of 2012, however,
benefited from lower discounts. Marketing investments are
expected to be higher due to brand investments to support Dr
Pepper's TEN platform.
Dr Pepper is trying to reinvigorate its CSD category by making
healthier and tastier alternatives. In 2011, Dr Pepper launched
the low-calorie version of its Dr Pepper brand of soft drinks, Dr
Pepper TEN. The 10 calorie drink has gained decent success,
driven by solid brand support.
Our proven model does not conclusively show that Dr Pepper is
likely to beat earnings this quarter. That is because a stock
needs to have both a positive earnings ESP (Read:
Zacks Earnings ESP: A Better Method
) and a Zacks Rank of #1, 2 or 3 for this to happen. That is not
the case here as you will see below.
Negative Zacks ESP:
The Zacks ESP is -1.1%. This is because the Most Accurate
estimate stands at 83 cents while the Zacks Consensus Estimate is
higher at 84 cents.
Zacks Rank #4 (Sell):
Dr Pepper carries a Zacks Rank #4 (Sell). We caution against
stocks with Zacks Ranks #4 and #5 (Sell rated stocks) going into
the earnings announcement, especially when the company is seeing
negative estimate revisions momentum.
Other Stocks to Consider
Here are some other companies from the consumer staples sector,
which you may want to consider as our model shows that they have
the right combination of elements to post an earnings beat this
Kraft Foods Group, Inc.
), Earnings ESP of +5.97% and a Zacks Rank #2 (Buy).
Monster Beverage Corporation
), Earnings ESP of +3.13% and a Zacks Rank #2.
The J. M. Smucker Company
), Earnings ESP of +4.20% and a Zacks Rank #2.
DR PEPPER SNAPL (DPS): Free Stock Analysis
KRAFT FOODS GRP (KRFT): Free Stock Analysis
MONSTER BEVERAG (MNST): Free Stock Analysis
SMUCKER JM (SJM): Free Stock Analysis Report
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