Dr Pepper Snapple Group Inc.
) is set to report its second-quarter 2014 results on Jul 24 before
the market opens. Last quarter, it posted a positive surprise of
In fact, the beverage company has delivered three positive earnings
surprises in the trailing four quarters, with an average surprise
of 15.19%. Let's see how things are shaping up for this
Why a Likely Positive Surprise?
Our proven model shows that Dr Pepper Snapple is likely to beat
earnings this quarter. That is because a stock needs to have both a
and a Zacks Rank of #1, 2 or 3 for this to happen.
Positive Zacks ESP:
Earnings ESP, which represents the difference between the Most
Accurate estimate and the Zacks Consensus Estimate, stands at
+3.30%. This is a meaningful and leading indicator of a
likely positive earnings surprise for shares.
Dr Pepper Snapple carries a Zacks Rank #3 (Hold) which when
combined with a +3.30% ESP makes us confident of an earnings beat.
Note that stocks with Zacks Rank #1, 2 or 3 have a significantly
higher chance of beating earnings. The Sell-rated stocks (#4 and 5)
should never be considered going into an earnings announcement.
Factors to Consider this Quarter
The company has been consistently delivering strong margins for the
past few quarters. Last quarter, the company's margins grew
significantly as sluggish volume trends of carbonated soft drinks
(CSDs) were offset by pricing gains, lower commodity and marketing
costs and improved productivity. We believe that these factors
should continue to boost profits in the second quarter as well.
However, the CSD softness is expected to continue this quarter as
well. Growing health and wellness consciousness, vigilance among
consumers about the use of artificial sweeteners, high sugar
content and related obesity concerns are affecting the sales of
carbonated beverages (CSD) of Dr Pepper as well as other soft drink
The Coca-Cola Company
Dr Pepper has been curtailing costs by reducing inventory and
storage costs. The company's cost reduction has also resulted in
improved cash flows. This allows it to regularly return cash to
shareholders in the form of dividends and share buybacks.
Other Stocks to Consider
Here are some other companies in beverage/food sectors you may
consider, as our model shows they have the right combination of
elements to post an earnings beat this quarter:
The Coca-Cola Company (KO), with an Earnings ESP of +4.76% and a
Zacks Rank #3.
The J.M. Smucker Co.
) with an Earnings ESP of +1.46% and a Zacks Rank #3.
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COCA COLA CO (KO): Free Stock Analysis Report
DR PEPPER SNAPL (DPS): Free Stock Analysis
PEPSICO INC (PEP): Free Stock Analysis Report
SMUCKER JM (SJM): Free Stock Analysis Report
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