Plano, TX-based Dr Pepper Snapple Group Inc. DPS reported strong fourth-quarter 2015 results, surpassing the Zacks Consensus Estimate for both earnings and sales.
However, the company's 2016 earnings guidance fell short of market expectations. In response, shares declined in pre-market trading.
Earnings Beat
Fourth-quarter adjusted earnings of $1.00 per share beat the Zacks Consensus Estimate of 98 cents by 2%. Moreover, earnings increased 14% year over year helped by strong top-line performance and margin expansion.
Strong Revenues and Margins
Dr Pepper's net sales rose 2% year over year to $1.55 billion as favorable product/package mix, price hikes and lower discounts offset currency headwinds. Currency hurt sales by 2%. Excluding the impact, net sales rose 4%. Net sales were ahead of the Zacks Consensus Estimate of $1.53 million by 1.3%.
Dr Pepper delivered solid top-line and bottom-line results for full-year 2015, despite increased currency headwinds. Pricing gains, innovations, powerful marketing programs, strong performance of non-carbonated beverages and productivity improvements drove the results.
Adjusted gross profit went up 4% to $938 million. Gross margins expanded 110 basis points (bps) to 60.7% as higher pricing, RCI productivity gains and lower commodity costs offset the unfavorable mix and currency headwinds.
Higher growth of non-carbonated beverages NCB and allied brands (higher-dollar revenue products) favorably benefited product mix and thereby, total sales. However, since it increases the dollar value of cost of goods sold (COGS), gross margins were negatively impacted.
Adjusted operating income increased 13% (15% ex-Fx) to $329 million year over year. Adjusted operating margins increased 200 bps to 21.3% driven by higher sales, improved gross margins and productivity improvements that offset higher operating costs and increased marketing investments.
The effective tax rate was 36.2%, slightly higher than 34.5% a year ago.
Volumes in Detail
Dr Pepper's sales volume is measured in two ways: 1) sales volume and 2) bottler case sales BCS volume. Sales volume represents concentrates and finished beverages sold to bottlers, retailers and distributors. BCS includes the sale of finished packaged beverages by the company and its bottlers to retailers and independent distributors.
Sales volume were flat in the quarter as 1% volume gain in Packaged Beverages and 6% in the Latin American segment was offset by 2% volume decline in Beverage Concentrates.
In the quarter, BCS volume went up 1%, less than 2% in the previous quarter, due to softer Carbonated Soft Drinks (CSDs) volumes. CSDs were flat as against 2% growth in the last quarter. However, NCB volumes grew 4%, same as previous quarter.
Geographically, volumes were flat in the U.S. and Canada, less than 1% increase in the last quarter, while increasing 6% in Mexico and the Caribbean, less than 8% in the previous quarter.
Full-Year 2015 Results
2015 adjusted earnings of $4.02 per share beat the Zacks Consensus Estimate of $4.01 by a penny and increased 10% from the year-ago results. Moreover, earnings beat management's guidance range of $3.92 to $3.98.
Net sales rose 3% year over year to $6.28 billion and marginally beat the Zacks Consensus Estimate of $6.27 billion. Net sales growth rate also surpassed management's expectation of approximately 2%.
2016 Outlook
The company expects full-year 2016 earnings within the range of $4.20 to $4.30 including currency headwinds of 18 cents per share. Currency headwinds are expected to hurt 2016 EPS by 4% due to the impact of a strong dollar on its Mexican and Canadian businesses. However, the outlook fell short of the Zacks Consensus Estimate of $4.33 per share.
Dr Pepper expects net sales to be up approximately 1%. Currency is likely to have a negative impact of about 2% on sales.
The full-year tax rate is likely to be about 35.5%. Capital expenditure is expected to be nearly 3% of net sales. The company plans to repurchase roughly $650 million to $700 million shares in the year.
Last week, Dr Pepper announced a 10.4% hike in the quarterly dividend and authorized an additional share buyback plan of $1 billion, bringing the total current authorization to $5 billion.
Stocks to Consider
Dr Pepper has a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader beverage sector are Primo Water Corp. PRMW, Keurig Green Mountain, Inc. GMCR and Constellation Brands Inc. STZ. All these stocks carry a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
DR PEPPER SNAPL DPS: Free Stock Analysis Report
PRIMO WATER CP PRMW: Free Stock Analysis Report
KEURIG GREEN MT GMCR: Free Stock Analysis Report
CONSTELLATN BRD STZ: Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Comments
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
