Keurig Dr Pepper Inc. KDP is currently trading at a notably low price-to-earnings (P/E) multiple, which is below the Zacks Beverages - Soft Drinks industry and broader Consumer Staples averages. KDP's forward 12-month P/E ratio is 15.40X, lower than the industry average of 17.18X and the sector average of 116.15X.

KDP Stock's P/E Performance

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The stock is undervalued compared with its industry peers, offering compelling value to investors looking for exposure to the consumer staple sector.

KDP shares have appreciated 3.1% in the trailing 12 months, outperforming the Zacks Beverages - Soft Drinks industry’s decline of 1.4% and the broader Consumer Staples industry’s return of 1.6%.

KDP Stock's Past One Year Performance

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Factors Driving KDP Stock’s Performance

A key driver of Keurig’s market share growth across its core categories, such as liquid refreshment beverages, K-Cup pods and brewers, has been its consumer-focused innovation model. This model, supported by scorecards that track metrics like brand awareness, household penetration and customer loyalty, ensures a strategic blend of innovation, effective brand activity and robust commercial execution.

In the third quarter of 2024, KDP made significant strides in expanding its operational footprint. The company completed the purchase and integration of new assets in Arizona and extended its distribution network into new territories in Tennessee. In Mexico, Keurig's company-owned Direct Store Delivery (DSD) network has been a pivotal asset in a market where traditional trade dominates.

Strength in Keurig's brand portfolio and in-market execution, combined with elasticity across most categories, significantly boosted revenues in the third quarter of 2024. The company experienced steady growth in its Refreshment Beverages segment, which delivered notable year-over-year improvements in the quarter.

Keurig is advancing its portfolio reshaping strategy with the acquisition of a 60% stake in GHOST Lifestyle LLC, known for its fast-growing GHOST Energy drinks, with an option to purchase the remaining 40% by 2028. This move, alongside the integration of Electrolit and La Colombe into KDP's DSD network, highlights the company's focus on high-growth partnerships and consumer-preferred categories. Additionally, a distribution deal with Bloom’s ready-to-drink energy drinks expands KDP’s offerings with a female-focused product.

Keurig has seen notable momentum in its Carbonated Soft Drink segment. Dr Pepper led the way, driven by its creamy coconut summer flavor, expanded zero-sugar options and the ongoing Fansville football campaign. Canada Dry’s Fruit Splash flavor and 7UP’s refreshed look, including the Shirley Temple flavor, also gained traction, particularly on social media.

Revised Estimates Signal Strength in KDP Stock

Reflecting the positive sentiment, the Zacks Consensus Estimate for KDP’s fiscal 2024 earnings has been unchanged in the past 30 days.

For fiscal 2024, the Zacks Consensus Estimate for KDP’s sales and EPS implies 3.5% and 7.3% year-over-year growth, respectively. The consensus mark for fiscal 2025 sales and earnings indicates 6% and 6.5% year-over-year increases, respectively.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

What’s Weighing on Keurig Dr Pepper’s Performance?

Keurig has been witnessing sluggishness in its coffee segment for a while now. In third-quarter 2024, sales in the U.S. Coffee segment fell 3.6% year over year, reflecting a net price decrease of 6.3%, somewhat compensated by a volume/mix improvement of 2.7%.

Although management expects the overall at-home coffee category trends to remain subdued, it has been strengthening the pod shipments. Like the year-to-date trends, management assumes muted at-home coffee category trends for 2024.

Keurig’s performance is further weighed down by pressures in certain still beverage categories, reflecting broader consumer softness. Categories such as ready-to-drink teas, which are heavily reliant on convenience store sales and carry a higher average price per ounce, are particularly impacted.

Final Words on KDP Stock

Investors should consider Keurig stock due to its compelling valuation, bolstered by strong execution across its core categories, with notable growth in liquid refreshment beverages, K-Cup pods and brewers. While the company faces challenges in its coffee segment, where sales declined in the third quarter of 2024, its diversified portfolio and strategic growth initiatives help offset these headwinds. For current investors, holding onto KDP stock appears prudent. The company currently carries a Zacks Rank #3 (Hold).

Don’t Miss These Solid Bets

We highlighted some better-ranked stocks from the broader Consumer Staples space, namely Freshpet, Inc. FRPT, Vita Coco Company COCO and The Boston Beer Company SAM.

Freshpet, together with its subsidiaries, manufactures, distributes and markets natural fresh meals and treats for dogs and cats, currently sporting a Zacks Rank of #1 (Strong Buy). FRPT delivered an earnings surprise of 144.5% in the last reported quarter. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Freshpet’s current fiscal year’s sales and earnings implies growth of 27.2% and 228.6%, respectively, from the year-ago reported number.

Vita Coco develops, markets and distributes coconut water products under the Vita Coco brand name in the United States, Canada, Europe, the Middle East, Africa and the Asia Pacific. The company currently has a Zacks Rank of 2 (Buy). COCO has a trailing four-quarter earnings surprise of 17.6%, on average.

The Zacks Consensus Estimate for COCO’s current financial-year sales and earnings suggests growth of 3.8% and 29.7%, respectively, from the year-ago reported figures.

Boston Beer is one of the largest craft brewers in the United States. The company produces beer, malt beverages, and cider products at company-owned breweries and under contract. Boston Beer currently has a Zacks Rank #2.

The Zacks Consensus Estimate for the company’s 2025 sales and earnings implies growth of 3.5% and 7.3%, respectively, from the previous year’s reported number. SAM has a trailing four-quarter average earnings surprise of 3.4%.

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