UPDATE: Bank Of America Downgrades Dr Pepper Snapple Group On Valuation

In a report published Monday, Bank of America analyst Bryan D. Spillane downgraded the rating on

from Neutral to Underperform, but raised the price target from $75.00 to $76.00. In the report, Bank of America noted, “In connection with our 2015 Food and Beverage Year Ahead Report we are downgrading DPS from Neutral to Underperform. Rating change reflects our view that improved underlying EPS growth prospects are largely priced in at current levels. DPS started 2014 valued at a discount relative its peers and ended at a slight premium. The stock was up 49.5% in 2014, with more than 30% of the price performance coming from multiple expansion and the rest from positive earnings revisions. DPS is currently trading at 18.2x CY16E P/E and 11.8x CY16E EV/EBITDA (versus US soft drink stocks at 18.5x and 15.1x respectively) and a 13% premium to the S&P 500 (vs 4% historical average). This suggests to us that the valuation gap has closed. As a result, we think continued outperformance of its food and beverage peer group will need to come from positive earnings revisions. Our $76 PO values DPS at 18.7x FY16E P/E, slightly ahead of its US soft-drink peers (18.5x).” Dr. Pepper Snapple Group closed on Friday at $71.60.