A Refreshing 1Q16: Time to Snap Up Dr Pepper Snapple Stock?
1Q16 earnings beat estimates
Dr Pepper Snapple (DPS), the third-largest soda beverage maker in the United States, impressed investors with upbeat earnings for 1Q16, which ended March 31, 2016. The company reported adjusted EPS (earnings per share) of $0.94, ahead of Wall Street analysts’ estimate of $0.86. The company’s stock price increased by 3% on April 27, the day its 1Q16 earnings were announced. Dr Pepper Snapple exceeded analysts’ estimates in all four quarters of 2015.
Impressive earnings growth
Dr Pepper Snapple’s adjusted EPS, which excludes the impact of one-time items, increased by 16% in 1Q16 from 1Q15. Dr Pepper Snapple’s 1Q16 earnings were driven by higher sales and enhanced margins. The company’s adjusted EPS growth was 13.6% in 4Q14 and 9.5% in 1Q15.
Currency headwinds of 1% and higher interest expenses partially offset the favorable factors. The $6 million increase in the 1Q16 interest expense was a result of higher debt balances and refinancing of debt in the prior year.
Peer performance in 1Q16
Dr Pepper Snapple’s adjusted EPS growth in 1Q16 outperformed that of beverage giants PepsiCo and Coca-Cola. Despite currency headwinds, PepsiCo (PEP) reported a 7.2% growth in its 1Q16 adjusted EPS. This growth was driven by higher gross margins and the company’s business in North America. Coca-Cola’s (KO) 1Q16 adjusted EPS fell by 6.3%, primarily due to lower revenue and currency headwinds. Dr Pepper Snapple constitutes 0.1% of the iShares Core S&P 500 ETF (IVV) and 0.2% of the iShares Russell 1000 Growth ETF (IWF).
Monster Beverage (MNST) is scheduled to announce its 1Q16 results on April 29. The company posted adjusted EPS growth of 7.9% in 2015. In the next part of this series, we’ll analyze the factors that drove Dr Pepper Snapple’s sales in 1Q16.
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