Keurig Dr Pepper Inc. KDP has been gaining from brand strength and pricing for a while. The company’s expansion initiatives and efforts to innovate its products have been yielding. KDP has been making substantial strides to reshape its portfolio in a bid to deliver growth. 

The company is making significant progress on its multi-year strategic agenda. Strength in the International and U.S. Refreshment Beverages segments has been aiding results.

KDP’s Growth Strategies Aid

The company’s growth reflects a strategic mix of innovation, brand activity and strong commercial execution, bolstered by its ongoing focus on cost efficiency, productivity and disciplined capital management. Strength in its brand portfolio and in-market execution, along with elasticity across most categories, has been aiding KDP’s revenues. In the most recent quarter, net sales increased 6.2% at constant currency, backed by a 5.3% increase in volume/mix and a favorable net price realization of 0.9%.

Continued strength in the Refreshment Beverages segment for a while has been aiding KDP’s overall performance. Robust sales and a favorable mix of products, along with contributions from Electrolit, have been bolstering the segment’s performance. The continuation of this trend has been bolstering the top line.

KDP’s consumer-focused innovation model, household penetration and loyalty have been driving its market share across key categories like liquid refreshment beverages, K-Cup pods and brewers across its major markets. 

Keurig Dr Pepper is making substantial strides with its strategy to reshape its portfolio through its recent acquisition of GHOST Lifestyle LLC. Via this acquisition, KDP added a successful emerging brand in the high-growth energy category, which is likely to benefit from inclusion in its advantaged distribution system. This reshaping approach focuses on prioritizing high-growth partnerships, with the Electrolit and La Colombe collaborations as significant examples.

KDP Stock’s Valuation

KDP stock is trading at an appealing valuation relative to the industry. Going by the price/earnings ratio, the stock is currently trading at 16.61 on a forward 12-month basis, lower than 19.35 for the industry. Also, the stock is trading lower than its high of 18.73.

Image Source: Zacks Investment Research

Hindrance to KDP’s Growth Path

Keurig Dr Pepper is reeling under persistent cost pressures, including higher selling, general and administrative expenses. These, along with the adverse impacts of higher marketing investment, have been acting as deterrents. 

The company is also witnessing sluggishness in the coffee segment. In fourth-quarter 2024, sales in the U.S. Coffee segment dipped 2.4% year over year to $1.13 billion, reflecting a volume/mix improvement of 0.7%, somewhat offset by an unfavorable net price realization of 3.1%. Brewer shipments fell 4% in the reported quarter, which is below the point of sales consumption. This is owing to seasonality. Soft sales at the segment are concerning.

Final Thoughts on KDP

Keurig Dr Pepper has been taking strategic initiatives to tackle the aforesaid issues. In 2025, the company looks forward to reinforcing Electrolit’s distribution, transitioning the brand from Hispanic specialty to the mainstream sports hydration aisle. 

Image Source: Zacks Investment Research

Momentum in away-from-home coffee has been improving and management sees an important opportunity ahead. KDP predicts category pricing will further strengthen in 2025, owing to the actions taken with respect to the green coffee inflation. Shares of KDP have gained 8.8% in the past year compared with the industry’s 3.8% growth. 

Analysts seem optimistic about this energy drinks and alternative beverages marketer. The Zacks Consensus Estimate for 2025 sales and earnings per share (EPS) is currently pegged at $16.17 billion and $2.03, respectively. These estimates indicate corresponding growth of 5.3% and 5.7% year over year. KDP currently carries a Zacks Rank #3 (Hold).

Stocks to Consider in Consumer Staples Space

The Chef's Warehouse CHEF, which is a distributor of specialty food products in the United States, currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

CHEF has a trailing four-quarter earnings surprise of 34%, on average. 

The Zacks Consensus Estimate for CHEF’s current financial-year sales and EPS indicates growth of 5.7% and 17.7%, respectively, from the year-ago numbers.

Post Holdings POST, which is a consumer-packaged goods holding company, has a Zacks Rank of 2 at present. POST has a trailing four-quarter average earnings surprise of 22.3%.

The Zacks Consensus Estimate for Post Holdings’ current financial-year sales and EPS implies growth of 0.3% and 2.2%, respectively, from the year-ago numbers.

Utz Brands UTZ, which has a diverse portfolio of salty snacks, currently carries a Zacks Rank of 2. UTZ has a trailing four-quarter earnings surprise of 8.8%, on average.

The Zacks Consensus Estimate for Utz Brands’ current financial-year sales and EPS indicates growth of 1.2% and 10.4%, respectively, from the year-ago numbers.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

The Chefs' Warehouse, Inc. (CHEF) : Free Stock Analysis Report

Post Holdings, Inc. (POST) : Free Stock Analysis Report

Keurig Dr Pepper, Inc (KDP) : Free Stock Analysis Report

Utz Brands, Inc. (UTZ) : Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research