Dr Pepper Hits 52-Week High on Strong Q2 Performance

Dr Pepper Snapple Group, Inc.'s DPS shares reached a new 52-week high of $63.41 on Sep 2.

Shares of the beverage giant have been rising sharply after it reported strong second-quarter 2014 results on Jul 24 and also increased its earnings outlook for the year.

In fact, Dr Pepper had an impressive run in the first half, delivering strong profits in both quarters. This was driven by pricing gains, productivity improvements, lower marketing investments than last year and lower interest expense and taxes. The share price of this Zacks Rank #2 (Buy) company has soared 34% year-to-date. Moreover, Hershey has delivered positive earnings surprises for four quarters in a row.

Second-Quarter Results

Second-quarter adjusted earnings of $1.06 per share beat the Zacks Consensus Estimate by 15.2% and increased 26% year over year, driven by strong margins and lower interest expense and taxes. Both net sales and volume grew 1% in the quarter. While gross margins expanded 100 basis points (bps), operating margin improved 290 bps backed by pricing gains, lower commodity costs, lower marketing investments than the last year and ongoing productivity gains.

Dr Pepper also raised its adjusted earnings per share outlook for the year during the second-quarter conference call on the back of stronger-than-expected first-half results. The company expects earnings in the range of $3.43 to $3.51 in 2014 higher than $3.38 to $3.46 expected previously. This represents an upside from the 2013 levels.

CSD Volumes Improved in the Second Quarter

Most impressively, CSD volume grew 2% in the second quarter, much better than the decline seen in the past two quarters, helped by the company's aggressive marketing initiatives. In order to drive sales, Dr Pepper is carrying out well-planned marketing programs which include increasing distribution and availability of its key brands and packages and expanding single-serve availability. These efforts have resulted in improved equity scores of its brands with regard to both relevance and strength.

Other Stocks to Consider

Other beverage stocks that have the same Zacks Rank as Dr Pepper are The WhiteWave Foods Co. WWAV, True Drinks Holdings, Inc. (TRUU) and PepsiCo, Inc. PEP.