KDP - Keurig Dr Pepper slips after Goldman Sachs warns on margin risk

Goldman Sachs lowered its rating on Keurig Dr Pepper ( NASDAQ: KDP ) to Neutral from Buy with better value seen elsewhere in the sector.

While analyst Bonnie Herzog and team think KDP continues to execute well in a challenging environment anre encouraged by the strong underlying momentum in both its coffee and packaged beverage businesses as well as its ongoing initiatives to expand/enhance its distribution capabilities, a more balanced risk/reward is seen on the stock.

The firm's caution is based on the expectation that brewer household penetration will start to normalize, pod attach rates moderate and KDP's packaged beverage business growth & market share gains begin to slow in the new environment.

"Furthermore, we see increased risk to KDP's margins as commodity inflation, especially related to coffee, remains elevated for KDP vs its peers based on our updated commodity tracker. As such, we lower our FY22 & FY23 estimates slightly, putting us below consensus"

Goldman Sachs reduced its price target on KDP to $37 from $39.

Shares of Keurig Dr Pepper ( KDP ) fell 1.21% in premarket trading to $36.83.

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