Stock price movement
Dr Pepper Snapple’s (DPS) stock price has risen 15.6% since the beginning of 2015 to $82.80 as of October 14. The company’s stock has outperformed beverage peers Coca-Cola (KO) and PepsiCo (PEP). Coca-Cola’s stock price has fallen 1.1% since the start of this year. PepsiCo’s stock price has risen 3.2% on a year-to-date basis.
The Consumer Staples Select Sector SPDR ETF (XLP) has risen 0.8% since the start of this year. The S&P 500 Index (SPY) (IVV) has fallen 3.1% year-to-date. All these stock price movements are as of October 14, 2015.
Impressive results so far
The rise in Dr Pepper Snapple’s stock price reflects its strong performance in the first half of the year and optimism about its results in the second half. In the first half of fiscal 2015, Dr Pepper Snapple’s net sales increased 2.5% to $3.1 billion. Net income, including one-time items, increased 3.3% to $377 million. Dr Pepper Snapple makes up 0.2% of the holdings of the iShares S&P 500 Growth ETF (IVW).
Dr Pepper Snapple is currently trading at a forward PE (price-to-earnings) multiple of 19.9x, up 7.9% since the start of the year. Nonalcoholic beverage companies Coca-Cola, PepsiCo, and Keurig Green Mountain (GMCR) are trading at forward PE ratios of 19.1x, 20.9x, and 15.8x, respectively.
Dr Pepper Snapple’s valuation multiple is higher than the S&P 500 Consumer Staples Index, which is currently trading at a forward PE ratio of 19.3x. The company is also trading at a higher multiple than the broader market represented by the S&P 500 Index, which is trading at a forward PE of 16.1x. All the valuation multiples are as of October 14, 2015.
In July 2015, Dr Pepper Snapple raised its core EPS (earnings per share) guidance by $0.05 to a range of $3.85–$3.93 based on strong performance in the first half of the year and the company’s view of its business in the remaining half.
As discussed in Part 3 of this series, Dr Pepper Snapple has a very high exposure to the carbonated soft drink category compared to still beverages. Given its high exposure to the US market, where soda is losing its fizz, and the shift in consumer preference to healthier beverages, it will be vital for the company to expand its still beverage portfolio.
For more updates, visit our Nonalcoholic Beverages page.