KDP Stock Rises 23% in the Past Six Months: Time to Buy, Sell or Hold?
Keurig Dr Pepper Inc. KDP stock has been trending up the charts in the past six months, recording growth of 22.7%. This upside comfortably outpaces the broader Consumer Staples sector’s return of 8.1% and the Zacks Beverages - Soft drinks industry‘s 8.9% growth in the same period. KDP’s shares also surpassed the S&P 500 index’s appreciation of 11.2% in the same time. The company is gaining from expansion initiatives, innovation, brand strength and pricing actions.
Currently priced at $37.48, KDP stock is trading at 2.1% to its 52-week high of $38.28, reached on Sept. 24. However, it is trading at a 35.5% premium to its 52-week low mark.
KDP’s Strategies Aid the Rally
Keurig Dr Pepper is benefiting from its consumer-centric innovation model, portfolio expansion into high-growth categories and robust route-to-market capabilities. These endeavors are supported by a constant focus on cost efficiency and capital discipline. KDP’s International business is performing well too.
KDP's Price Performance
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Sturdy momentum in the Refreshment Beverages segment has been bolstering Keurig Dr Pepper’s performance for a while. In second-quarter 2024, sales in this segment grew 3.3% year over year, reflecting higher net price realization and volume/mix. Volume/mix benefited from expanded scale from recent collaborations and in-market strength from launched innovation.
In addition, Keurig Dr Pepper is experiencing strong market share gains across categories. Within its CSD category, the relative market share trends have been improving. Innovations are driving higher share trends across the CSD portfolio. Outside of CSDs, the company has been seeing strength in its Wonderwater category.
Keurig Dr Pepper Stock’s Valuation & Estimates
Keurig Dr Pepper’s stock is trading at an attractive valuation relative to the industry. Going by the price/earnings ratio, the stock is currently trading at 18.44 on a forward 12-month basis, lower than the industry’s 21.47.
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Analysts seem quite optimistic about KDP. The Zacks Consensus Estimate for 2024 sales and earnings per share (EPS) is currently pegged at $15.41 billion and $1.92, respectively. These estimates imply corresponding growth of 4% and 7.3% year over year. The consensus mark for 2025 sales and EPS is presently $16.06 billion and $2.07, respectively, indicating increases of 4.2% and 7.5% year over year.
Bumps in KDP’s Growth Trajectory
Keurig Dr Pepper grapples with continued cost pressures in transportation, warehousing and labor. These, along with the adverse impacts of higher marketing investment, acted as deterrents. A tough operating landscape, with resilient demand and inflationary pressures, is likely to further act as a headwind.
The struggling coffee segment is hurting Keurig Dr Pepper’s performance. Sales in the U.S. Coffee segment fell 2.1% year over year in the most recent quarter, reflecting a net price decrease of 2.9%, which was somewhat compensated by a volume/mix improvement of 0.8%. To aid growth in the coffee unit, the company has been strengthening the pod shipments. However, management assumes muted at-home coffee category trends for 2024.
How to Play KDP Stock?
The aforementioned catalysts with brand strength and significant pricing actions will continue aiding Keurig Dr Pepper’s performance ahead. A strong Refreshment Beverages segment bodes well. However, macroeconomic uncertainties and the sluggish coffee unit are likely to continue to be headwinds in the near term.
For existing investors, retaining this Zacks Rank #3 (Hold) stock seems to be a prudent choice, given the company’s robust strategies and attractive valuation.
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Some better-ranked stocks have been discussed below:
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CHEF has a trailing four-quarter earnings surprise of 33.7%, on average.
The Zacks Consensus Estimate for CHEF’s current financial-year sales and EPS indicates growth of 9.7% and 12.6%, respectively, from the year-ago numbers.
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Keurig Dr Pepper, Inc (KDP) : Free Stock Analysis Report