MILAN – Keurig Dr Pepper released quarterly figures that were somewhat disappointing: 3Q revenues came in at $3.89 billion, below the analyst consensus of $3.92 billion, while diluted earnings per share was in line with estimates at $0.51. In a separate statement, the company also announced it had entered into a definitive agreement to acquire energy drink maker Ghost in a deal worth nearly $1 billion.
Sales of coffee product in the US were 3.6% down to $976m, reflecting falling prices and lower demand of K-Cups. On the other hand, Refreshment Beverages unit sales grew 5.3% to $2.39 billion, with international sales flat at $525 million. The company confirmed its guidance for 2024.
Commenting on the results, Keurig Dr Pepper ‘s CEO Tim Cofer stated, “Three quarters into the year, we remain on track to achieve our full year outlook, while notching significant progress against our multi-year strategic agenda. This morning’s exciting announcement of our acquisition of GHOST is yet another such step, accelerating our portfolio evolution toward growth-accretive and consumer-preferred spaces. In Q3, we were encouraged by further improvement in our volume/mix performance despite a muted operating environment, and also demonstrated building cost discipline throughout the organization. Both are important elements underpinning our confidence as we focus on a strong finish to 2024 and plan for a healthy 2025.”
Keurig Dr Pepper: Third Quarter Consolidated Results
Net sales for the third quarter increased 2.3% to $3.9 billion. On a constant currency basis, net sales advanced 3.1%, driven by volume/mix growth of 3.5%, partially offset by modestly unfavorable net price realization of 0.4%.
GAAP operating income increased 0.7% to $902 million, despite an unfavorable year-over-year impact of items affecting comparability. Adjusted operating income increased 7.5% to $1,050 million and totaled 27.0% as a percent of net sales. Adjusted operating income growth primarily reflected net productivity savings and disciplined overhead expense management, partially offset by the impact of inflation.
GAAP net income increased 18.9% to $616 million, or $0.45 per diluted share, aided by a favorable year-over-year impact of items affecting comparability. Adjusted net income increased 3.9% to $694 million, and Adjusted diluted EPS increased 6.3% to $0.51. Adjusted diluted EPS growth was driven by the healthy Adjusted operating income growth and a lower share count, partially offset by higher interest expense.
Operating cash flow for the third quarter was $628 million and free cash flow totaled $503 million.
Keurig Dr Pepper: Third Quarter Segment Results
U.S. Refreshment Beverages
Net sales for the third quarter increased 5.3% to $2.4 billion, driven by volume/mix growth of 4.0% and higher net price realization of 1.3%. The volume/mix performance reflected an incremental contribution from recent partnerships, as well as healthy base business trends.
GAAP operating income increased 6.8% to $722 million. Adjusted operating income also increased 6.8% to $742 million and totaled 31.0% as a percent of net sales. GAAP and Adjusted operating income growth were driven by the net sales growth, net productivity savings, and an earned C4 performance incentive, partially offset by the impact of cost inflation.
U.S. Coffee
Net sales for the third quarter decreased 3.6% to $1 billion, with volume/mix growth of 2.7% more than offset by unfavorable net price realization of 6.3%.
K-Cup® Pod shipments decreased 0.4%, reflecting owned & licensed market share gains in a still muted at-home coffee category.
Brewer shipments totaled 10.5 million for the twelve months ending September 30, 2024, increasing 3.3% year-over-year, supported by stabilizing coffeemaker category trends and continued Keurig market share momentum.
GAAP operating income decreased 13.3% to $254 million, which included an unfavorable year-over-year impact of items affecting comparability. Adjusted operating income decreased 7.2% to $309 million and totaled 31.7% as a percent of net sales. Adjusted operating income reflected the unfavorable impact of net price realization, which more than offset net productivity savings.
International
Net sales for the third quarter increased 0.4% to $0.5 billion. On a constant currency basis, net sales advanced 6.5%, driven by higher net price realization of 3.4% and volume/mix growth of 3.1%. The quarterly performance reflected broad-based market share gains across the portfolio.
GAAP operating income increased 12.9% to $157 million. Adjusted operating income increased 16.6% to $161 million and totaled 30.7% as a percent of net sales. GAAP and Adjusted operating income growth were driven by the net sales growth and net productivity savings, partially offset by the impact of inflation and an increase in marketing investment.
2024 Guidance
The 2024 guidance provided below is presented on a constant currency, non-GAAP basis. The Company does not provide reconciliations of such forward-looking non-GAAP measures to GAAP measures, due to the inability to predict the amount and timing of impacts outside of the Company’s control on certain items, such as non-cash gains or losses resulting from mark-to-market adjustments of derivative instruments, among others, which could be material.
KDP reaffirmed its fiscal 2024 guidance for constant currency net sales growth in a mid-single-digit range and Adjusted diluted EPS growth in a high-single-digit range.
