Keurig Dr Pepper's (KDP) Strategic Efforts Good: Apt to Hold

Keurig Dr Pepper Inc. KDP seems well-poised for growth, thanks to its robust business strategies. The company has been gaining from expansion initiatives, innovation, brand strength and pricing actions. It has also been launching various products and expanding distribution across the international markets.

Buoyed by such strengths, shares of this energy drinks and alternative beverages’ marketer have gained 8.2% against the industry’s 0.6% drop over the past year.

Analysts seem quite optimistic about the company. The Zacks Consensus Estimate for 2024 sales and earnings per share (EPS) is currently pegged at $8 billion and $1.81, respectively. These estimates show corresponding growth of 11.7% and 16.8% year over year.

What’s More?

Keurig Dr Pepper has been experiencing momentum in the Refreshment Beverages segment for a while now. In first-quarter 2024, sales in the U.S. Refreshment Beverages segment totaled $2.1 billion, up 4.3% year over year, reflecting a higher net price realization of 5.6%. Results were driven by higher pricing, persistent elasticities across most categories and contribution from KDP's commenced distribution partnership with Nutrabolt for C4 Energy. Continuation of this trend will continue to aid the company’s top line in the near term.

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In addition, management highlighted an evolving enterprise strategy, which focuses on five pillars to deliver sustainable growth. These comprise a road map to guide the company’s employees' actions every day with directives to champion consumer-obsessed brand building, shape its now and next beverage portfolio, amplify the route-to-market advantage, produce fuel for growth and dynamically allocate capital.

Keurig Dr Pepper has been witnessing strong market share gains across categories. In the first quarter, across its Canadian coffee business, market share grew for Keurig brewers and for the owned and licensed pod portfolio led by the Van Houtte brand. The company’s relative market share and net sales performance showed a later innovation cadence compared with 2023, mainly in CSDs. Management has been investing in the route-to-market capabilities, including the on-premise expansion in Canada, and is focused on strengthening its DSD network in Mexico. In addition, management looks forward to strengthening the company’s international route to market capabilities.

The aforesaid catalysts along with continued brand strength and significant pricing have been aiding Keurig Dr Pepper’s performance for a while now. This led to impressive first-quarter results, wherein the top and bottom lines surpassed the Zacks Consensus Estimate. Both earnings and revenues improved year over year. Net price realization grew 3.1% year over year. Continued strength in the company's brand portfolio and in-market execution, along with elasticity across most categories, aided revenues.

Notably, management projects constant-currency net sales growth in the mid-single-digit range and adjusted EPS to rise in high-single-digits in 2024. This guidance is in sync with the company’s long-term targets. The view also reflects continued momentum in the U.S. Refreshment Beverages and international segments.

To wrap up, Monster Beverage seems to be a decent investment bet given all the aforementioned positives. A Momentum Score of B further adds strength to this current Zacks Rank #3 (Hold) company.

Stocks to Consider

The Chef’s Warehouse CHEF, which engages in the distribution of specialty food products, currently carries a Zacks Rank #2 (Buy). CHEF has a trailing four-quarter earnings surprise of 23.4%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for The Chef’s Warehouse’s current fiscal year sales and earnings suggests growth of 9.5% and 7.9%, respectively, from the year-ago reported numbers.

Vital Farms Inc. VITL offers a range of produced pasture-raised foods. It currently carries a Zacks Rank of 2. VITL has a trailing four-quarter average earnings surprise of 102.1%.

The Zacks Consensus Estimate for Vital Farms’ current financial-year sales and earnings suggests growth of 17.2% and 37.3%, respectively, from the year-ago reported numbers.

Utz Brands Inc. UTZ, which manufactures a diverse portfolio of salty snacks, currently carries a Zacks Rank of 2. UTZ has a trailing four-quarter earnings surprise of 2%, on average.

The Zacks Consensus Estimate for Utz Brands’ current financial-year earnings suggests growth of 24.6% from the year-ago reported numbers.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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