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7 Questions Morgan Stanley Is Asking At Dr. Pepper

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In a report published Monday, Morgan Stanley analysts maintained an Equal-Weight rating on Dr Pepper Snapple Group, Inc. (NYSE: DPS), after the company reported retail sales growth and its fourth consecutive quarter of a pickup in total NARTD beverage growth.

In the report, Morgan Stanley noted, "…DPS' total NARTD beverage growth has accelerated for four straight quarters to +1.6% in Q4 from flat in Q3, -0.3% in Q2,and -2% in Q1, driven by accelerating pricing and improving (albeit still declining y-o-y) volume growth."

The analysts posed 7 vital questions for the DPS management:

1. FY 2015 Guidance: Noting that the company had off late been conservative with its FY EPS guidance, the analysts asked whether the management feels that the FY15 EPS guidance is also conservative "in light of an improving US CSD pricing environment, as well as a near-term US macro recovery."

2. NA CSD Pricing: Morgan Stanley enquired whether DPS management believes that their now more rational NA CSD pricing, with increasing discipline at KO/PEP, is sustainable. "Do you see opportunities for further acceleration above historical levels?" the analysts added.

3. Price-Pack Architecture: KO and PEP had been taking greater price/mix than DPS on a y-o-y basis. The company had mentioned that this gap was due to mix shifts to smaller packages, which DPS is currently not driving to the same extent. "What is preventing you from pursuing a similar price pack architecture strategy in which you would drive mix shifts to smaller, higher price per oz. packages?" Morgan Stanley asked.

4. CSD BCS Volumes: The company's CSD BCS volume growth accelerated more than 100 bps sequentially to +2% y-o-y in Q4. "Can you provide your perspective on the competitive environment for flavored CSDs, and why you are seeing a slight sequential improvement in volume growth?"

5. Non-Carb Portfolio Performance: The analysts wanted to know whether DPS believes that the strength exhibited by Snapple in Q4 is sustainable, and whether the impact of the value line de-emphasis could be quantified. While pointing out that Hawaiian Punch continues to be weak, the analysts asked whether DPS had plans to stabilize the brand, and what its role is within the company's non-carb portfolio.

6. Market Share: "Are you seeing any signs that lower marketing in 2014 could impact your market share results and can you discuss your share of voice in the category?"

7. Latin America: Morgan Stanley enquired about the reasons for the "significant sequential deceleration" in Q4 in this region.

Latest Ratings for DPS

Mar 2018RBC CapitalUpgradesSector PerformOutperform
Mar 2018Stifel NicolausMaintainsBuyBuy
Feb 2018JefferiesDowngradesBuyHold

View More Analyst Ratings for DPS
View the Latest Analyst Ratings

Posted-In: Morgan StanleyAnalyst Color Analyst Ratings


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