Coffee Service

Keurig Dr Pepper Q3 earnings beat expectations on 5.2% sales gain

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October 30, 2020

Keurig Dr Pepper Inc. reported strong financial results for the third quarter ended Sept. 30, 2020 and strengthened guidance for the full year.

Net sales in the third quarter increased 5.2% from $2.87 billion in 2019 to $3 billion in 2020, in line with expectations, while adjusted earnings per share of 39 cents beat analysts' expectations of 37 cents and diluted earnings per share were 31 cents compared to 21 cents in the year-ago period.

Shares traded at $27.19 Thursday against a $18.98-$32 52-week range, according to Seeking Alpha.

"In Q3, we delivered another strong quarter, marked by accelerated growth in net sales, adjusted operating income and EPS, while continuing to post strong market share growth across our portfolio and reducing our management leverage ratio," Chairman and CEO Bob Gamgort said in a press release. "As a result, we're confident in our ability to deliver 2020 at the high-end of our guidance, while reinvesting any upside performance in brand marketing and innovation."

On a constant currency basis, net sales advanced 5.8%, reflecting strong volume/mix growth of 6.6%, partially offset by lower net price realization of 0.8%.

The company posted double-digit dollar growth in K-Cup coffee pods for at-home consumption which was partially offset by weakness in the office coffee channel, as elevated work-from-home trends persisted throughout the quarter. Keurig brewers posted exceptional growth, driven by successful innovation and retailer inventory stocking ahead of the holiday season.

Packaged beverages improved market share in the majority of the segment's portfolio. Growth in large-format channels continued to be strong, and performance in the convenience and gas channels improved sequentially during the quarter, as consumer mobility increased.

Performance of beverage concentrates improved significantly from the previous quarter, declining slightly versus the prior year, reflecting a sequential reopening of quick-serve and other fast-casual restaurants, which are serviced by the fountain foodservice component of the business.

DP in-market performance in tracked channels for the third quarter of 2020 continued to be very strong, with market share advancing in more than 90% of the company's liquid refreshment beverages retail base, including carbonated sodas, premium unflavored water, shelf stable fruit drinks, shelf stable vegetable juice and shelf stable apple juice and apple sauce. Brands include Dr Pepper, A&W and Canada Dry CSDs, CORE hydration and evian premium water, Snapple teas and juice drinks, Clamato vegetable juice and Motts apple juice and apple sauce.

Retail consumption of single-serve pods manufactured by KDP grew 10.1% in IRI tracked channels, with dollar market share of KDP manufactured pods remaining strong and KDP's owned and licensed brand portfolio posting improving share trends.