Keurig (KDP) to Report Q3 Earnings: What's in the Offing?

Keurig Dr Pepper Inc. KDP is scheduled to release third-quarter 2020 results on Oct 29, before market open. In the last reported quarter, the company delivered an earnings surprise of 3.1%. We note that this beverage company’s earnings outperformed the Zacks Consensus Estimate, with the average surprise being 3.4% in the trailing four quarters.

The Zacks Consensus Estimate for third-quarter earnings is pegged at 37 cents. Though stable in the past 30 days, it suggests 15.6% growth from the year-ago quarter’s reported figure. Moreover, the consensus mark for quarterly revenues is pegged at $2.97 billion, indicating 3.5% growth from the year-ago period.

Key Factors to Note

Keurig Dr Pepper is one of the many companies taking advantage of the coronavirus-led stay-at-home and work-from-home trends, which are likely to have continued in the third quarter. This along with the inability to visit coffee shops has led to strong in-home coffee consumption trends. The company has been benefiting from strong sales growth across packaged beverages and coffee businesses due to a sudden spike in at-home consumption, which is expected to have contributed to top-line growth in the to-be-reported quarter. Moreover, it has been witnessing strong market share growth trends in the past few quarters, which is expected to have persisted.

Keurig Dr Pepper, Inc Price and EPS Surprise


Keurig Dr Pepper, Inc Price and EPS Surprise

Keurig Dr Pepper, Inc price-eps-surprise | Keurig Dr Pepper, Inc Quote

Moreover, the company’s bottom line has been benefiting from solid productivity and merger synergies as well as reduced marketing and other discretionary expenses. The persistence of these synergies is likely to get reflected in the company’s margins and earnings in the to-be-reported quarter.

However, adverse impacts of the coronavirus outbreak have been weighing on Keurig’s other segments, namely the fountain and foodservice businesses as well as the office coffee business. The away-from-home coffee channel has been significantly affected due to office closures and hospitality shutdowns caused by the pandemic.

Further, volume/mix has been mainly affected by a steep decline in the fountain and foodservice business, which includes the restaurant and hospitality sectors, due to the coronavirus outbreak-related shelter-in-place orders and the change in consumer behavior. Despite the reopening of the economy in many regions, the continuation of the aforementioned trends is expected to have impacted the away-from-home channel sales to some extent in the third quarter.

Apart from these, it has been reeling under unfavorable currency movements that have weighed on sales for Latin America Beverages, which is expected to have persisted in the to-be-reported quarter.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Keurig Dr Pepper this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Although Keurig Dr Pepper carries a Zacks Rank #2, its Earnings ESP of 0.00% makes surprise prediction difficult.

Stocks With Favorable Combinations

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat.

Nu Skin Enterprises, Inc. NUS presently has an Earnings ESP of +3.54% and it sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Newell Brands, Inc. NWL has an Earnings ESP of +0.33% and a Zacks Rank #2 at present.

The Kraft Heinz Company KHC currently has an Earnings ESP of +0.80% and a Zacks Rank #3.

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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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