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BMO Capital Increases Dr Pepper Snapple’s Price Target to $100

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Dec. 4 2020, Updated 10:53 a.m. ET

Price movement

Dr Pepper Snapple Group (DPS) has a market cap of $18.4 billion. It rose by 1.7% to close at $97.87 per share on July 28, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were 0.31%, 3.3%, and 6.2%, respectively, on the same day.

DPS is trading 0.91% above its 20-day moving average, 4.2% above its 50-day moving average, and 8.0% above its 200-day moving average.

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Related ETFs and peers

The Consumer Staples Select Sector SPDR ETF (XLP) invests 0.93% of its holdings in DPS. The ETF tracks a market-cap-weighted index of consumer staples stocks drawn from the S&P 500. The YTD price movement of XLP was 9.0% on July 28, 2016.

The Fidelity MSCI Consumer Staples ETF (FSTA) invests 0.67% of its holdings in Dr Pepper Snapple. The ETF tracks a market-cap-weighted index of stocks in the US consumer staples sector.

The market caps of DPS’s competitors are as follows:

  • Coca-Cola (KO): $188.9 billion
  • Kraft Heinz (KHC): $103.9 billion
  • Monster Beverage (MNST): $31.9 billion

Dr Pepper Snapple’s rating

BMO Capital has increased the price target of Dr Pepper Snapple Group to $100 from $94 per share and rated the stock as “market perform.”

TheStreet Ratings rated the stock as a “buy” with a score of A.

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Performance of Dr Pepper Snapple in 2Q16

Dr Pepper Snapple reported 2Q16 net sales of $1.70 billion, a rise of 2.4% compared to net sales of $1.66 billion in 2Q15. Sales of beverage concentrates and packaged beverages rose by 3.6% and 3.1%, respectively. Sales of Latin America beverages fell by 6.6% in 2Q16 compared to 2Q15.

The company’s gross profit margin and income from operations rose by 2.0% and 11.7%, respectively, in 2Q16 compared to the prior year period.

Its net income and EPS (earnings per share) rose to $260.0 million and $1.39, respectively, in 2Q16 compared to $220.0 million and $1.14, respectively, in 2Q15. It reported adjusted EPS of $1.25 in 2Q16, a rise of 10.6% compared to 2Q15.

DPS’s cash and cash equivalents fell by 73.1%, and its inventories rose by 12.9% in 2Q16 compared to 4Q15. Its current ratio and debt-to-equity ratio fell to 1.13x and 2.9x, respectively, in 2Q16, compared to 1.15x and 3.1x, respectively, in 4Q15.

Projections

The company has made the following projections for fiscal 2016:

  • net sales growth of ~2%
  • core EPS in the range of $4.27 to $4.35
  • foreign currency and transaction to negatively impact net sales by ~1% and core EPS growth by ~3%
  • packaging and ingredient costs to decrease COGS (cost of goods sold) by ~1% on a constant volume-mix basis
  • core tax rate of ~35.5%
  • capital spending of ~3% of net sales
  • repurchase $650 million to $700 million of its common stock

Next we’ll take a look at Lear.

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