Plano, TX-based Dr Pepper Snapple Group Inc.DPS reported fourth quarter of 2016 results, with earnings missing the Zacks Consensus Estimate and revenues meeting the mark. Moreover, the company provided 2017 earnings guidance that is below the analysts' expectations.
Earnings in Details
Fourth-quarter adjusted earnings per share (EPS) of $1.04 missed the Zacks Consensus Estimate of $1.06 by 1.9%. However, earnings increased 4% year over year, courtesy of strong top-line growth.
Full-year 2016 earnings came in at $4.39 per share, below the Zacks Consensus Estimate of $4.41 but up 9% year over year.
Revenues & Margins
Dr Pepper Snapple's net sales of $1.578 billion were almost in line with the Zacks Consensus Estimate of $1.577 billion. Net sales rose 2.1% year over year as favorable product/package mix, price hikes and sales volume offset currency headwinds.
While sales were driven by 1% volume growth, currency hurt sales by 1%.
Full year 2016 revenues came in at $6.440 billion, up from $6.282 billion in 2015 and surpassed the Zacks Consensus Estimate of $6.43 billion.
Quarterly Segment Detail
Segment-wise, the company generated higher revenues at the Beverage Concentrates (up 4.4% year over year) and Packaged Beverages (2.5%) segments and Latin America Beverages segment revenues dropped 8.5% in the quarter.
Adjusted operating income of $327 million dropped from $329 million a year ago. Adjusted operating margin dropped 60 basis points to 20.7%.
Dr Pepper Snapple's sales volume is measured in two ways: 1) sales volume and 2) bottler case sales (BCS) volume. Sales volume represents concentrates and finished beverages sold to bottlers, retailers and distributors. BCS includes the sale of finished packaged beverages by the company and its bottlers to retailers and independent distributors.
Sales volume increased 1% in the quarter, same as the previous quarter.
In the quarter, BCS volumes were flat versus 2% growth in the previous quarter. During the quarter, Carbonated Soft Drinks (CSDs) volumes increased 1% and non-carbonated beverages (NCBs) volumes decreased 1%.
Geographically, the U.S. and Canada volumes were flat, softer than 1% growth witnessed in the last quarter. Meanwhile, volumes increased 5% in Mexico and the Caribbean, higher than the previous quarter level of 4%.
Cash and cash equivalents were $1,787 million as of Dec 31, 2016, up from $911 million at 2015-end. Long-term obligations were $4,468 million, up from $2,875 million at 2015-end.
In 2016, net cash provided by operating activities totaled $939 million, down 5.2% year over year.
Free cash flow came in at $759 million in 2016, down 6.5%.
Dr Pepper Snapple expects core earnings in the range of $4.44 to $4.54 per share, below the zacks Consensus Estimates of $4.74 per share. Currency headwinds are expected to hurt 2017 core EPS by 11 cents.
The company expects net sales growth of 4.5%. Currency is likely to have a negative impact of about 1% on sales.
Organic volume is expected to witness approximately 1% growth, while total volume growth will likely be close to 2% (inclusive of the Bai acquisition, which closed on Jan 31, 2017).
Capital expenditure is expected to be nearly 3% of net sales. The company plans to repurchase $450 million to $500 million of shares in the year.
Dr Pepper Snapple carries a Zacks Rank #4 (Sell).
Dr Pepper Snapple Group, Inc Price, Consensus and EPS Surprise
Upcoming Peer Release
Pepsico, Inc. PEP is set to report fourth-quarter 2016 results on Feb 15, before the market opens.
Monster Beverage Corp. MNST is expected to report its quarterly results on Feb 23.
The Best Place to Start Your Stock Search
Today, you are invited to download the full list of 220 Zacks Rank #1 "Strong Buy" stocks - absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 "Strong Sells" and other private research. See these stocks free >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.