Bank Of America Raises Dr Pepper Snapple Group Price Target

Bank of America raised its price target on Dr Pepper Snapple Group Inc. DPS Friday from $70 to $75 and maintained a Neutral rating.

Analyst Bryan Spillane thought the “valuation is justified as it values DPS at a discount” to The Coca-Cola Company and PepsiCo, Inc. which have “more diversified business models.”

Downside risks to the price target and “investment thesis are less scale in bottling operations than KO and PEP, potential for KO and PEP to increase spending levels making it more expensive for DPS to compete in the US, less control over distribution than peers, and higher than expected commodity costs,” according to the analyst note.

Spillane also noted overall in consumer staple stocks that “prospects for sales growth is an ongoing concern, as overall consumption trends remain subdued in developed and developing markets across the sector, with notable weakness in food, soft drinks and tobacco... In addition, foreign exchange remains a headwind.”

The $75 price target was based on 18.8x the firm’s 2016 EPS estimate of $4.00.

Dr Pepper Snapple Group recently traded at $70.97, down 0.08 percent.