Like the American political system most think of the soft drink industry as a two horse race between PepsiCo (NYSE:PEP) and Coca-Cola (NYSE:KO). This morning Dr. Pepper Snapple Group Inc. (NYSE:DPS) continued to prove that you can’t ignore the iced tea party. The group is predicting overall net sales growth of 3% to 5% in 2012 and overall earnings per share of between $2.90 and $2.98.
DPS reported quarterly revenues of $1.62 billion, up 2.5% from the same quarter last year and coming just shy of the analyst estimates of $1.63 billion. Profits also increased over the same quarter last year by $6 million and when you consider that year to date the company has repurchased $152 million in stock earnings per share has increased 7.79% to $0.83. The increase in revenue and profit margin would have been even better were it not for a 2% loss due to foreign currency exchange, a 10% decline in Latin American sales, and a decline in gross margin of 0.5% due to 2% cost increases in packaging and ingredients.
In terms of volume sold carbonated drink sales were flat year over year and non-carbonated sales declined 6%. Contributing to this was a volume decline of 1% in North America and 2% in the Caribbean, lead by a 20% decline in volume of Hawaiian Punch. The leader in volume increase was Mott’s Clamato at a rate of 8%, a sign that we are enjoying more Caesars this year worldwide.
Dr. Pepper Snapple Group was formerly known as Cadbury Schweppes Americas Beverages and was spun-off from Cadbury Schweppes in May of 2008. The company is home to Dr. Pepper, 7 Up, A&W Root Beer, Crush, Mott’s, Squirt, Yoo-hoo, and Snapple among others and also manufactures Welch’s and Sunkist brands under license. The company makes its home in Frisco, Texas where it sponsors the Dr. Pepper Ballpark, a former winner of Best Architectural Design.
DPS has been on a rollercoaster ride since the market opened, initially rising 1.8% to $44.56 before falling 4.98% to $42.34 and is now again gaining momentum at $43.25. The Dow Jones on the other hand is performing solidly at a gain of 1.78%
Foodbeat’s take: Dr. Pepper Snapple Group doesn’t have the same level of notoriety as Coca-Cola or Pepsi but their operating model is solid and their margins are often superior to the bigger players. If they can stop the bleeding in terms of international sales and sales of non-carbonated drinks they should have no trouble meeting or exceeding their guidance for 2012.
Disclosure: I hold long positions in both DPS and PEP.
Source(s): Business Wire, Reuters