Coffee Service

Keurig Dr Pepper boosts Q2 2021 sales, earnings

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July 29, 2021

Keurig Dr Pepper Inc. reported strong financial results for the second quarter ended June 30, 2021. The company also raised its 2021 guidance for constant currency net sales growth to a range of 6% to 7%, from the previous 4% to 6%, and reaffirmed its guidance for adjusted diluted EPS growth in the range of 13% to 15%, according to a press release.

Net sales rose 9.6% from $2.86 billion for Q2, 2020 to $3.14 billion for Q2, 2021, with beverage concentrates and Latin America beverages posting strong double-digit growth. On a constant currency basis, net sales advanced 8.1% in the quarter, reflecting higher volume/mix of 6.1% and favorable net price realization of 2%. For the first six months of 2021, constant currency net sales advanced 13.4% versus the first six months of 2019.

GAAP net income rose 50% from $298 million in Q2, 2020 to to $448 million in Q2, 2021, rising from 21 cents per diluted share to 31 cents. This performance was driven by the growth in operating income and lower interest expense.

Adjusted net income advanced 14.7% from $469 million in Q2, 2020 to $538 million in Q2, 2021, reflecting the adjusted operating income growth and lower interest expense stemming from the first quarter 2021 strategic refinancing that resulted in favorable interest rates.

Adjusted diluted EPS advanced 15.2% from 33 cents in Q2, 2020 to 38 cents in Q2, 2021.

"KDP delivered another strong quarter, as we successfully navigated a challenging macro environment marked by inflation, supply chain disruptions and a tight labor market," Bob Gamgort, chairman and CEO, said in the release. "For the first six months of 2021, we delivered 9% revenue growth and nearly 15% adjusted diluted EPS growth. Notwithstanding the expectation for ongoing challenges to persist for some time, we are confident in our strengthened top-line outlook and plan to reinvest any profit upside back into the business. In addition, our commitment to achieve our three-year merger targets ending this year remains unchanged."

GAAP operating income rose 31% from $561 million in Q2, 2020 to $734 million in Q2, 2021, reflecting the growth in net sales, productivity and merger synergies, as well as the favorable year-over-year impact of items affecting comparability. These drivers were partially offset by significantly higher marketing investments in the quarter, inflation in input costs, logistics and manufacturing and higher operating expenses associated with increased consumer demand.

In liquid refreshment beverages, KDP in-market performance in the quarter remained strong, with retail dollar consumption advancing 5.2% across the company's cold beverage retail base, reflecting strength in CSDs, premium unflavored water, enhanced flavored water, apple juice, apple sauce and coconut water.

This performance was driven by Dr Pepper, Sunkist, A&W, 7UP and Squirt CSDs, CORE Hydration, Evian, Bai, Motts apple juice and apple sauce, Polar and Vita Coco. On a two-year stacked basis, KDP gained market share in nearly 80% of its cold beverage retail base and grew consumption of its cold beverage portfolio by 20%.

In coffee, retail consumption of single-serve pods manufactured by KDP in tracked channels decreased 1.2% compared to the year-ago period that was impacted by consumer stock-up purchasing related to the pandemic. Performance in the away-from-home business improved versus the year-ago shelter-in-place environment, although the increase in consumer mobility has not yet translated into a broad return to offices.

On a two-year stacked basis, retail consumption of single-serve pods manufactured by KDP increased 13% in IRi tracked channels.

Net sales for coffee systems rose 5.6% from $1.04 billion to $1.10 billion in the comparative second quarters. On a constant currency basis, net sales advanced 3.9%, reflecting higher volume/mix of 3.5% and favorable net price realization of 0.4%.

The volume/mix increase of 3.5% in the quarter reflected pod volume growth of 0.2% and brewer volume growth of 29%. The pod volume performance reflected unfavorable shipment timing impacted by at-home consumer stock-up behavior in the year-ago period, largely offset by an improved performance in the away-from-home business, although the return to offices continues to be slow.

The brewer volume growth largely reflected continued strong retail consumption, primarily driven by the company's successful brewer innovation program and, to a lesser extent, favorable timing of Prime Day during the second quarter of 2021 versus the third quarter of 2020.

The $3.14 billion in Q2, 2021 revenue beat analyst expectations by $80 million, while the non-GAAP EPS of 38 cents beat expectations by 1 cent and the GAAP EPS of 31 cents missed expectations by 3 cents, according to Seeking Alpha.

Shares traded at $35.13 today against a 52-week range of $26.67-$37.11.