Can Dr Pepper Snapple Continue its Earnings Growth Streak in 1Q16?
1Q16 expectations
Dr. Pepper Snapple (DPS), the third largest US soda maker, is scheduled to announce its 1Q16 earnings on April 27. For the first quarter, analysts expect to see adjusted EPS (earnings per share) of $0.86. This estimate reflects a growth rate of 6.5% over 1Q15 EPS.
Recap of historical performance
Dr Pepper Snapple exceeded analysts’ expectations in all four quarters of 2015. The company’s 4Q15 adjusted EPS increased by an impressive 13.6%, driven by higher sales and improved margins. Dr. Pepper Snapple’s adjusted EPS rose 10.1% in 2015. Dr Pepper Snapple’s performance in 2015 was better than that of beverage giants PepsiCo (PEP) and Coca-Cola (KO) in terms of earnings and sales growth. Currency headwinds had a stronger impact on PepsiCo’s and Coca-Cola’s results last year due to their extensive international presence.
Company’s estimates
In February 2016, Dr Pepper Snapple issued its outlook for 2016, which estimated that adjusted EPS will be in the range of $4.20–$4.30, as compared to adjusted EPS of $4.02 in 2015. The company expects currency headwinds to negatively impact adjusted EPS growth by ~4%, or $0.18 per share, in 2016.
Aside from currency headwinds, Dr Pepper Snapple’s earnings in 1Q16 and 2016 might be negatively impacted by higher interest expenses and an increase in SG&A (selling, general, and administrative) expenses. The rise in SG&A expenses is expected to be caused by increased health and welfare and other insurance costs as well as higher field labor costs. The PowerShares Dynamic Food & Beverage Portfolio (PBJ) has 2.5% exposure to Dr Pepper Snapple.
Coca-Cola and PepsiCo beat analysts’ earnings estimates in 1Q16. For more information, read PepsiCo Delivers Mixed 1Q16 Results but Reaffirms 2016 Outlook and Why Coca-Cola Stock Fell after Better-than-Expected 1Q16 Earnings. Monster Beverage (MNST), which reported 7.9% growth in its 2015 adjusted EPS, is scheduled to report its 1Q16 earnings on April 29.
In the next part of this series, we’ll discuss the factors that might impact Dr Pepper Snapple’s 1Q16 sales.
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