• Full Year Revenue Growth: Constant currency net sales grew approximately 4%.
• Full Year EPS Growth: EPS increased by 8%.
• Q4 Revenue Growth: Constant currency net sales increased more than 6%.
• Q4 US Refreshment Beverages Sales Growth: Net sales grew 10.3%.
• Q4 US Coffee Sales Decline: Net sales decreased 2%.
• Q4 International Sales Growth: Constant currency net sales increased at a high single-digit rate.
• Free Cash Flow: Full year free cash flow was $1.7 billion.
• Share Buybacks: $1.1 billion worth of share buybacks.
• Dividend Increase: 7% increase in quarterly dividend.
• Management Leverage: Ended 2024 with management leverage of 3.3 times.
• 2025 Guidance: Mid-single-digit net sales growth and high single-digit EPS growth expected.

• Warning! GuruFocus has detected 4 Warning Sign with KDP.

Release Date: February 25, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Keurig Dr Pepper Inc (NASDAQ:KDP) delivered strong financial performance in 2024, with constant currency net sales growing approximately 4% and EPS growing 8%.
• The company successfully expanded its portfolio into high-growth segments, including the acquisition of GHOST in the energy category.
• KDP's US refreshment beverages segment showed impressive growth, with a 10% increase in net sales in Q4, driven by strong performance in carbonated soft drinks.
• The company achieved significant productivity savings and overhead leverage, contributing to improved profitability.
• KDP strengthened its free cash flow generation, enabling strategic investments, share buybacks, and dividend increases.

Negative Points

• The US Coffee segment experienced a 2% decline in net sales in Q4, impacted by temporary net price declines and green coffee inflation.
• KDP faces challenges from escalating inflationary pressures, particularly in green coffee costs, which may require further pricing actions.
• The company's management leverage increased to 3.3 times, above the long-term target of less than 2.5 times, due to the GHOST acquisition.
• KDP anticipates a 1 to 2 percentage point headwind from foreign exchange rates in 2025.
• The company expects subdued performance in the US Coffee segment in 2025 due to dynamic commodity environments and inflationary pressures.

Q & A Highlights

Q: Can you discuss the building blocks for 2025, particularly regarding revenue and profit growth, considering factors like the leap year, Easter dynamics, and green coffee inflation? A: Sudhanshu Priyadarshi, CFO, explained that they expect mid-single-digit net sales growth and high single-digit EPS growth for 2025. The key drivers include momentum in US refreshment beverages and International segments, innovation, commercial plans, and modest net pricing. The GHOST acquisition will also contribute incrementally. Despite challenges like green coffee inflation, they plan to offset this through pricing, productivity, and overhead discipline.

Q: What insights do you have on the coffee category's subdued growth in 2024, and what are your expectations for 2025? A: Timothy Cofer, COO, stated that coffee remains an attractive category long-term. In 2024, the focus was on volume stabilization, with pod volume turning positive in Q4. For 2025, the focus shifts to preserving profit dollars amid record green coffee costs, while continuing to invest in innovation and activation across pods, brewers, and other coffee formats.

Q: How do you view the energy market in 2025, especially with the GHOST acquisition and other activities in the category? A: Timothy Cofer, COO, expressed optimism about the energy category, noting its fast growth and profitability. KDP's energy portfolio, including GHOST, C4, Black Rifle, and Bloom, targets distinct consumer cohorts. The GHOST acquisition, completed at the end of 2024, is expected to significantly impact the brand's trajectory as KDP leverages its distribution and operational strengths.

Q: What are your expectations for pod volume recovery and elasticity in the coffee segment? A: Timothy Cofer, COO, mentioned that they implemented a pod price increase in January, with competitors following suit. While it's early to assess elasticity, consumer response has been in line with expectations. KDP is exploring options to offset incremental pressure, including productivity and potential further pricing actions, to preserve profit and continue investing in the category.

Q: What are the expectations for gross margins in 2025, considering green coffee inflation and other factors? A: Sudhanshu Priyadarshi, CFO, indicated that they expect modest operating margin expansion driven by volume mix growth, positive pricing, and productivity. While hedging provides some visibility, it only delays inflation impacts. KDP plans to manage P&L levers to deliver on commitments while investing for the long term.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.