KDP - Keurig Dr Pepper trades higher after beat-and-raise quarter

2023-07-27 07:48:34 ET

Keurig Dr Pepper ( NASDAQ: KDP ) gained in early trading on Thursday after posting a solid Q2 earnings report.

The company reported that sales for the quarter increased 6.6% to $3.79B. On a constant currency basis, sales rose 6.1%, reflecting net price realization of 8.2%, only slightly offset by lower volume/mix of 2.1%. Keurig Dr Pepper ( KDP ) said the resilient volume/mix performance reflected the continued strength of the company's brand portfolio and in-market execution, as well as continued modest elasticities across most categories. Sales were up 11.8% for the U.S. refreshment beverages segment, off a net price realization of 12.0% and a slight decrease in volume/mix of 0.2%. Sales fell 5.7% in the U.S. Coffee segment as at-home coffee consumption in the quarter continued to be impacted by year-over-year changes in mobility, with sequential improvement in category volume trends observable each month of the quarter.

Adjusted operating income increased 4.4% during the quarter to $873M, including a strong double-digit increase in marketing investment, reflecting the strong growth in net sales and adjusted gross profit, which more than offset transportation, warehousing and labor inflation. Adjusted operating income was 23.0% as a percentage of sales.

Free cash flow of $295M was generated during the quarter, reflecting lower operating cash flow and higher capital expenditures in comparison to a year ago.

CEO update: "We saw continued momentum in the U.S. Refreshment Beverages and International segments, as well as encouraging intraquarter developments in U.S. Coffee, where we expect a sequential recovery in revenue and a meaningful inflection in margins in the back half. On a consolidated basis, we continue to drive healthy growth while reinvesting in our business and are increasingly confident in our full year outlook, which now reflects even stronger underlying EPS results."

Looking ahead, KDP now sees full-year sales growth of +5% to +6% vs. a prior outlook of +5%. Full-year EPS is seen as being up 6% to 7%. Both those guidance ranges included a mid-point above the consensus expectation.

Shares of Keurig Dr Pepper gained 1.11% in premarket action to $32.90.

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